# Compound Interest Problems

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1FINANCE 149 – FIRST ASSIGNMENT
2Table of ContentsSolution to Question 13Solution to Question 23Solution to Question 33-4Solution to Question 44-5Solution to Question 55-6Solution to Question 66Solution to Question 76-7Solution to Question 87References8
31.Solution to Question 1As the question is not aligned correctly, the following assumption is madeProfit is 2% of the regular selling priceAlso given, Overhead is 13.5% of the regular selling priceTherefore, selling price of the utensil is \$53.69 + 13.5% of Selling Price (Overhead Cost) + 2% of Selling Price (Profit)SP = \$53.69 + 13.5%(SP) + 2%(SP)On solving, SP = \$63.54Operating Profit or Loss on Sale:Product sold at markdown of 18% of SP, which is \$63.54 – 18% (63.54) = \$52.10Therefore, Operating Profit/Loss on sale = \$52.10 - \$53.69 – 13.5%(63.54) = \$10.17 (Loss)2.Solution to Question 24/10, n/90, This means that the credit period is 90 days and if the Invoice is paid within 10 days, discount received shall be 4% of the Invoice value.(a)Highest simple interest rate shall be the rate at which the discount received shall be equal to the simple interest on the borrowing amount which is computed as follows:Discount = \$7600 *4% = \$304, which shall be the simple interest for the bill period of 90 days on \$7,600. No of days in a year is taken at 360 days.Therefore, the simple interest rate shall be:\$304 = \$7,600 * x% * (90/360)On solving, Simple interest rate shall be 16%.(b)If borrowed at 9.5%, savings shall be the excess of Discount over Interest paid which is computed as follows:Interest = \$7,600*9.5%*(90/360) = \$180.5Therefore, Savings = \$304 - \$180.5 = \$123.53.Solution to Question 3(a)Maturity date of the note = 6 months from 31 March, 2008 which is 30 September, 2008.

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