T.O.B.

FABIZ EN page 1 of 5
Test Preparation Material

Teacher’s Name: Madalina Moroianu

a) Simple interest: E = k * t * z / 36,000

where E = interest; k = capital; t = period, in days; z = interest rate
b) Capital plus interest: K = k + E; K = k [1 + (t * z)/36,000]
c) Compound interest (annually): E = A * (1 + R/100)n
where A = initial capital; E = total capital; R = annual interest rate; n = number of years
d) Compound interest (years and a fraction of the term):
E = A * (1 + R/100)n * [1 + (p/q) * R/100] where p = no. of months and q = 12

e)Interest capitalization: R = 100 [(1 + i/(100 * n’))n’ - 1]

where i = annual rate of simple interest and n’= no of periods of capitalization within a year
f) In case of interest capitalization for a credit allowed on a fixed no of years, the final
capital invested should be: E = A * [1 + R/ (100*n’)]n*n’
where n = no of years and n’ = no of capitalization periods within a year

1. The owner of 10,000USD lends it for 60 days. The interest rate for this invest-
ment is 7.5%. What is the interest that the owner received?

E = (10,000 * 7.5 * 60)/36,000 = 125 USD

2. What capital should be invested to obtain an interest of 200USD, after 90 days

and an interest rate of 8%?

K = (36,000 * 200) / (90 * 8) = 10,000 USD

3. Determine the interest rate for a loan of 250,000USD, for 120 days and an inter-
est of 3,500USD.

z = (36,000 * 3,500) / (250,000 * 120) = 4.2%

4. Determine the period for a loan of 200,000USD, with an interest rate of 6% and a
cashed interest of 5,000USD.

t = (36,000 * 5,000) / (200,000 * 6) = 150 days.

5. What capital should be lent for a period of 160 days with an annually interest
rate of 8.5% in order to obtain a total amount of 60,000USD?

60,000 = k * (1 + 8.5 * 160 / 36,000) => k = 57,803.47USD

T.O.B. FABIZ EN page 2 of 5
Test Preparation Material

6. Goods worth 10,000USD are sold on credit for a period of 5 years at an annual
interest rate of 6%. What is the total capital that should have to be paid?

E = 10,000 * (1 + 6/100)5 = 13,382USD

7. Determine the total amount to be paid and the total interest, considering that the
amount of the credit is 100,000USD, the rate of interest is 8% per year and the
term of the credit is 3 years.

E = 100,000 * (1 + 8/100)3 = 125,971.2USD

E - A = 125,971.2 - 100,000 = 25,971.2USD

8. Goods worth 100,000USD are sold on credit for 5 years and 8 months, with a 6%
annual rate of interest. Calculate the interest to be paid.

E = 100,000 * (1,06)5 * [3 + (8/12) * 0.06] = 139,175.46USD

E - A = 39,175.46USD

9. Calculate the annual compound interest rate if the annual simple interest rate is
12% and the periods of capitalization are:

a)6 months
R = 100[(1 + 12/(2 * 100))2 - 1] = 12.36%
b) 3 months
R = 100[(1 + 12/(4 * 100))4 - 1] = 12.55%

10. We have a credit of 1,000,000USD, for 5 years, paid in 10 equal, half annually
installments, with an annual rate of interest of 8%. What is the value of each draft
and the interest to be paid?

Method A:
E1 = 1,000,000 * 8 * 180 / 36,000 = 40,000 USD and D1 = 100,000 + 40,000 = 140,000USD
E2 = 900,000 * 8 * 180 / 36,000 = 36,000USD and D2 = 100,000 + 36,000 = 136,000USD
E3 = 800,000 * 8 * 180 / 36,000 = 32,000USD and D3 = 100,000 + 32,000 = 132,000USD
E4 = 700,000 * 8 * 180 / 36,000 = 28,000USD and D4 = 100,000 + 28,000 = 128,000USD
E5 = 600,000 * 8 * 180 / 36,000 = 24,000USD and D5 = 100,000 + 24,000 = 124,000USD
E6 = 500,000 * 8 * 180 / 36,000 = 20,000USD and D6 = 100,000 + 20,000 = 120,000USD
E7 = 400,000 * 8 * 180 / 36,000 = 16,000USD and D7 = 100,000 + 16,000 = 116,000USD
T.O.B. FABIZ EN page 3 of 5
Test Preparation Material

E8 = 300,000 * 8 * 180 / 36,000 = 12,000 USD and D8 = 100,000 + 12,000 = 112,000USD

E9 = 200,000 * 8 * 180 / 36,000 = 8,000 USD and D9 = 100,000 + 8,000 = 108,000USD
E10 = 100,000 * 8 * 180 / 36,000 = 4,000USD and D10 = 100,000 + 4,000 = 104,000USD

Total Interest = 220,000USD

Total capital paid = 1,000,000 + 220,000 = 1,220,000USD

No of Capital (A) in The interest of 8% The nominal value The maturity in

draft USD per year for the of the each issued days
overdraft (in USD) draft (in USD)

1 1,000,000 40,000 140,000 180

2 900,000 36,000 136,000 180

3 800,000 32,000 132,000 180

4 700,000 28,000 128,000 180

5 600,000 24,000 124,000 180

6 500,000 20,000 120,000 180

7 400,000 16,000 116,000 180

8 300,000 12,000 112,000 180

9 200,000 8,000 108,000 180

10 100,000 4,000 104,000 180

Total: 1,000,000 220,000 1,220,000 5 years

Method B:
E1 = 100,000 * 8 * 180 / 36,000 = 4,000 USD and D1 = 100,000 + 4,000 = 104,000USD
E2 = 100,000 * 8 * 360 / 36,000 = 8,000USD and D2 = 100,000 + 8,000 = 108,000USD
E3 = 100,000 * 8 * 540 / 36,000 = 12,000USD and D3 = 100,000 + 12,000 = 112,000USD
E4 = 100,000 * 8 * 720 / 36,000 = 16,000USD and D4 = 100,000 + 16,000 = 116,000USD
E5 = 100,000 * 8 * 900 / 36,000 = 20,000USD and D5 = 100,000 + 20,000 = 120,000USD
E6 = 100,000 * 8 * 1080 / 36,000 = 24,000USD and D6 = 100,000 + 24,000 = 124,000USD
E7 = 100,000 * 8 * 1260 / 36,000 = 28,000USD and D7 = 100,000 + 28,000 = 128,000USD
E8 = 100,000 * 8 * 1440 / 36,000 = 32,000 USD and D8 = 100,000 + 32,000 = 132,000USD
E9 = 100,000 * 8 * 1620 / 36,000 = 36,000 USD and D9 = 100,000 + 36,000 = 136,000USD
T.O.B. FABIZ EN page 4 of 5
Test Preparation Material

E10 = 100,000 * 8 * 1800 / 36,000 = 40,000USD and D10 = 100,000 + 40,000 = 140,000USD

Total Interest = 220,000USD

Total capital paid = 1,000,000 + 220,000 = 1,220,000USD

No of Capital (A) in The interest of 8% The nominal value The maturity in

draft USD per year for the of the each issued days
overdraft (in USD) draft (in USD)

1 100,000 4,000 104,000 180

2 100,000 8,000 108,000 360

3 100,000 12,000 112,000 540

4 100,000 16,000 116,000 720

5 100,000 20,000 120,000 900

6 100,000 24,000 124,000 1080

7 100,000 28,000 128,000 1260

8 100,000 32,000 132,000 1440

9 100,000 36,000 136,000 1620

10 100,000 40,000 140,000 1800

Total: 1,000,000 220,000 1,220,000 5 years

11. A credit of 3,000,000USD is reimbursable in six, equal, half yearly installments.

The annual interest rate is 6%. Determine the interest to be paid and the value of
drafts that should be issued.

E1 = 3,000,000 * 6 * 180 / 36,000 = 90,000 USD and D1 = 500,000 + 90,000 = 590,000USD

E2 = 2,500,000 * 6 * 180 / 36,000 = 75,000USD and D2 = 500,000 + 75,000 = 575,000USD
E3 = 2,000,000 * 6 * 180 / 36,000 = 60,000USD and D3 = 500,000 + 60,000 = 560,000USD
E4 = 1,500,000 * 6 * 180 / 36,000 = 45,000USD and D4 = 500,000 + 45,000 = 545,000USD
E5 = 1,000,000 * 6 * 180 / 36,000 = 30,000USD and D5 = 500,000 + 30,000 = 530,000USD
E6 = 500,000 * 6 * 180 / 36,000 = 15,000USD and D6 = 500,000 + 15,000 = 515,000USD
T.O.B. FABIZ EN page 5 of 5
Test Preparation Material

No of draft Capital (A) The interest of The value of The maturity

8% paid to the the draft in days
overdraft

1 500,000 90,000 590,000 180

2 500,000 75,000 575,000 360

3 500,000 60,000 560,000 540

4 500,000 45,000 545,000 720

5 500,000 30,000 530,000 900

6 500,000 15,000 515,000 1080

Total: 3,000,000 315,000 3,315,000 3 years

12. The owner of 10,000USD deposits the amount for 10 years at a rate of interest
of 8% quarterly compounded. After 4 years, they receive a proposal to change
the capitalization conditions to an interest rate of 10%, half yearly compounded.
Which should their decision be?

Ef1 = 10,000 [ 1 + 8/(100*4)]4*10 = 10,000 ( 1.02)40 = $22,080 would be the final sum with the first
capitalization conditions

E1 = 10,000 [ 1 + 8/(100*4)]4*4 = 10,000 (1.02)16 = $13,700 earned after 4years

Ef2 = 13,700 [ 1 + 10/(100*2)]2*6 = 13,700 (1.05)12 = $24,660 would be the final sum with the new capi-
talization conditions

Ef1 < Ef2 , therefore the depositor should take the change in capitalization conditions.