By A. H. Pollard (Auth.)
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W h a t is the true rate of c o m p o u n d interest which the customer is paying? At the end of 2 years— (a) H o w m u c h interest would he have paid? (b) H o w m u c h principal would he have repaid? 9-2 A loan of $400 for 5 m o n t h s at 9 % "flat" is repayable by 5 equal monthly instalments. (i) W h a t is the m o n t h l y instalment? (ii) Draw u p a schedule, based on the assumption of the "rule of 78," showing the interest contained in each instalment, the principal contained in each instalment a n d the principal o u t s t a n d i n g immediately after each m o n t h ' s payment.
04)- + 2000 ( 1 . '. 222 years' time) 38 EQUATIONS RATE OF INTEREST OF VALUE UNKNOWN Problem 3: A p a i n t i n g bought 10 years ago for $200 has just been sold for $285. W h a t is the interest r e t u r n on the investment? e. *. e. a little over 3 . 6 % per a n n u m . Problem 4: A $100 d e b e n t u r e is purchased in the market for $90 immediately after an interest payment. Interest is payable annually at 5 % (of the face value) and the d e b e n t u r e is due to m a t u r e in six years' time.
0 4 ) 700 ( 1 . 04) - 14 = $57 to the nearest $1 It would have been equally possible to equate the two sets of payments at the end of 14 years, giving 12 2 200 ( 1 . 0 4 ) + 3 0 0 ( 1 . 0 4 ) 6 + X = 700 ( 1 . 04) = $57 as before. T h e calculation has thus been considerably simplified, a n d it is well worth spending a little time selecting the best p o i n t of time to equate the payments. TIME OF ONE PAYMENT UNKNOWN Problem 2: W h e n should $3000 be paid to be equivalent at 4 % interest to $1000 due in five years' time a n d $2000 due in 10 years?