1. Hernandez decided to borrow $85,000 for 10 months. She found that banks would lend to her only if she had a cosigner on the note-fortunately her uncle was a successful business owner and he agreed to cosign. Bank One offered the funds at a 10% simple discount. Find the maturity value of the loan and the discount. 2. Once Hernandez's uncle agreed to cosign on a loan, Union Bank offered to lend Hernandez $85,000 at 10.5% simple interest. Find the interest and maturity value. 3. Find the loan with the lower interest and find the difference in interest. 4. Find the effective interest rate for both loans to the nearest hundredth of a percent. Bank Interest Loan Amount Effective Rate Bank One $7727.27 $85,000 Union Bank $7437.50 $85,000
1. Hernandez decided to borrow $85,000 for 10 months. She found that banks would lend to her only if she had a cosigner on the note-fortunately her uncle was a successful business owner and he agreed to cosign. Bank One offered the funds at a 10% simple discount. Find the maturity value of the loan and the discount. 2. Once Hernandez's uncle agreed to cosign on a loan, Union Bank offered to lend Hernandez $85,000 at 10.5% simple interest. Find the interest and maturity value. 3. Find the loan with the lower interest and find the difference in interest. 4. Find the effective interest rate for both loans to the nearest hundredth of a percent. Bank Interest Loan Amount Effective Rate Bank One $7727.27 $85,000 Union Bank $7437.50 $85,000
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 15P
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