   Chapter 10.II, Problem 34RE ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

Chapter
Section ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# Steve Perry borrowed $10,000 at 12 % ordinary interest for 60 days. On day 20 of the loan, Steve made a partial payment of$4,000. What is the new maturity value of the loan?

To determine

To calculate: The maturity value of loan taken by Steve Perry where loan amount is $10,000, at a ordinary rate of interest of 12% for a duration of 60 days but after 20 days, partial payment of$4,000 was repaid.

Explanation

Given Information:

Principal amount of loan is $10,000, rate of ordinary interest is 12%, duration of loan is 60 days but after 20 days, partial payment of$4,000 was repaid.

Formula used:

The formula to compute simple interest is,

I=PRT

Where, I is the amount of interest, P is the principal amount, R is the rate of interest, and T is the time duration.

The formula to calculate Maturity value is,

MV=P(1+RT)

Where, MV is Maturity value, P is Principal Amount, R is the rate of interest, and T is the time duration.

Calculation:

Consider that principal amount is $10,000, rate of interest is 12%, time duration is 20 days. Simplify the rate of interest as, 12%=12100=0.12 Compute the time using ordinary interest method as, Time=Number of days of a loan360=20360 Substitute$10,000 for amount of interest, 0.12 for rate of interest, 20360 for time duration in the formula

I=PRT.

I=PRT=10,000×0.12×20360=$66.67 Hence, rate of interest is$66.67.

Out of the repayment of $4,000 that was made within 20 days, it included interest amount of$66.67. So, the principal amount that was repaid is,

$4,000$66

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