21. Financial Accounting i. Maxpein borrowed £1000 and agreed to repay the money plus 8% interest in 6 months. Two months after the money was borrowed, the creditor agreed to settle the debt by discounting it at the same simple interest. a) How much did the creditor receive when he discounted the debt? b) Discount the amount paid in a) at the date when the man initially borrowed the money and explain why it is different from the initial amount of £1000. ii. Do again the (i) using a compound interest rate and explain why the amount discounted through the two ways are equals.
21. Financial Accounting i. Maxpein borrowed £1000 and agreed to repay the money plus 8% interest in 6 months. Two months after the money was borrowed, the creditor agreed to settle the debt by discounting it at the same simple interest. a) How much did the creditor receive when he discounted the debt? b) Discount the amount paid in a) at the date when the man initially borrowed the money and explain why it is different from the initial amount of £1000. ii. Do again the (i) using a compound interest rate and explain why the amount discounted through the two ways are equals.
Chapter4: Income Exclusions
Section: Chapter Questions
Problem 61P
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