Explanation Given Information: A loan of $4,250 at 7.2% annual interest rate is made on April 12 and repaid on October 12 Formula used: To find the exact interest, use 365 as the number of days in a year. The exact time is the time that is based on a counting the exact number of days in a given time period. To find the exact time of the loan by the use of the sequential numbers table, follow the below steps: 1. If the beginning and the due dates of the loan falls within the same year then subtract the sequential number of beginning date from the sequential number due date. 2. If the beginning and the due dates of the loan do not fall within the same year. (a) Then subtract the sequential number of beginning date from 365. (b) And then add the sequential number of the due date to the difference from step 2(a). 3. If February 29 is between the beginning and due dates, add 1 to the difference from step 1 or the sum from step 2(b). The total amount of money due at the end of a loan period, that is, the amount of the loan and the interest, is called the maturity value of the loan. It is given by adding the principal and the interest. Maturity value = principal + interest M V = P + I M V = P + P R T M V = P ( 1 + R T ) Calculation: It is required to find the maturity value of a loan of $4,250 at 7.2% annual interest rate such that the loan is made on April 12 and repaid on October 12. It can be observed that the ordinary interest is slightly higher than the exact interest. The method which gives ordinary interest is most often used by bankers when they are lending money because it gives slightly higher amount of interest. This method is called banker’s rule. First, find the exact time. Note that the exact time is the time that is based on counting the exact number of days in a given time period. Here the beginning date is April 12 and the due date is October 12 which falls within the same year. To find the exact time of a loan by the use of the sequential numbers table, subtract the sequential number of beginning date from the sequential number of due date

11th Edition

ISBN: 9780134496436

Author: Cheryl Cleaves, Margie Hobbs, Jeffrey Noble

Publisher: PEARSON

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Chapter 11.2, Problem 3-4SC

To determine

To calculate: The maturity value of a loan of $4,250 at 7.2% annual interest rate such that the loan is made on April 12 and repaid on October 12.

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Chapter 11.2, Problem 3-3SC

Chapter 11.2, Problem 3-5SC

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Chapter 11 Solutions

Business Math (11th Edition)

Ch. 11.1 - Prob. 1-1SC Ch. 11.1 - Prob. 1-2SC Ch. 11.1 - Prob. 1-3SC Ch. 11.1 - Prob. 1-4SC Ch. 11.1 - Prob. 2-1SC Ch. 11.1 - Prob. 2-2SC Ch. 11.1 - Prob. 2-3SC Ch. 11.1 - Prob. 2-4SC Ch. 11.1 - Prob. 3-1SC Ch. 11.1 - Prob. 3-2SC

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