Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:Pamela borrowed $18,000 for investment purposes on March 12 on a demand note providing for a variable rate of interest and
payment of any accrued interest on December 31. She repaid $1,780 on June 17, $1,810 on September 10, and $3,490 on November
8. How much is the final payment on December 31 if the rate of interest was 10.5% on March 12, 7.75% effective August 1, and 5.45%
effective October 1? (Use the Declining Balance Approach)
June 17 Payment
Calculate the interest accrued to June 17.
Calculate the amount of the payment that can be applied to the principal.
Calculate the remaining principal.
September 10 Payment
Calculate the interest accrued to August 1.
Calculate the interest accrued to September 10.
Calculate the amount of the payment that can be applied to the principal.
Calculate the remaining principal.
November 8 Payment
Calculate the interest accrued to October 1.
Calculate the interest accrued to November 8.
Calculate the amount of the payment that can be applied to the principal.
Calculate the remaining principal.
Transcribed Image Text:November 8 Payment
Calculate the interest accrued to October 1.
Calculate the interest accrued to November 8.
Calculate the amount of the payment that can be applied to the principal.
Calculate the remaining principal.
December 31 Payment
Calculate the interest accrued to December 31. (Not Inclusive)
Calculate the payment required to pay off the loan on December 31.
Note that is question is not the same as the last few questions.
In the last few questions we were asked for the interest including the last day. (Inclusive)
But in this question we are paying the loan off on December 31, so we do not charge interest for the last day.
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