ILOCOS SUR POLYTECHNIC STATE COLLEGE

COLLEGE OF BUSINESS MANAGEMENT

NORTH CLUSTER

STA. MARIA, ILOCOS SUR

IN PARTIAL FULLFILLMENT

TO THE REQUIREMENTS

OF THE SUBJECT

BUSINESS MATH

PRESENTED BY:

MONICA D. APALLA

BSHRM 1A

PRESENTED TO:

MR. MARVIN GALCON

SUBJECT INSTRUCTOR

PROBLEM SOLVING INVOLVING INTEREST

1. You put $1000 into an investment yielding 6% annual interest; you left the money in for two years. How much interest do you get at the end of those two years?

Given:

P = $1000

r = 0.06 (because I have to convert the percent to decimal form)

t = 2

Find: I

Solution:

I = Prt

I = (1000) (0.06) (2)

I= 120

2. You invested $500 and received $650 after three years. What had been the interest rate?

Given:

P = $500

I = $650 – 500 = $150

t = 3

Solution:

I=Prt

150 = (500) (r) (3)

150 = 1500r

150/1500 = r = 0.10

3. You have $50,000 to invest, and two funds that you'd like to invest in. The You-Risk-It Fund (Fund Y) yields 14% interest. The Extra-Dull Fund (Fund X) yields 6% interest. Because of college financial-aid implications, you don't think you can afford to earn more than $4,500 in interest income this year. How much should you put in each fund?

The problem here comes from the fact that I'm splitting that $50,000 in principal into two smaller amounts:

|I |P |r |t | |Fund X |? |? |0.06 |1 | |Fund Y |? |? |0.14 |1 | |total |4,500 |50,000 |--- |--- | |* The amount in Fund Y is (the total) less or 50,000 – x.

|I |P |r |t | |Fund X |? |x |0.06 |1 | |Fund Y |? |50,000 – x |0.14 |1 | |total |4,500 |50,000 |--- |--- | |* I can now multiply across (right to left) and fill in the "interest" column.

|I |P |r |t | |Fund X |0.06x |x |0.06 |1 | |Fund Y |0.14(50,000 – x) |50,000 – x |0.14 |1 | |total |4,500 |50,000 |--- |--- | |

* Since the interest from Fund X and the interest from Fund Y will add up to $4,500, I can add down the "interest" column, and set this sum equal to the given total interest:

0.06x + 0.14(50,000 – x) = 4,500

0.06x + 7,000 – 0.14x = 4,500

7,000 – 0.08x = 4,500

–0.08x = –2,500

x = 31,250

Then y = 50,000 – 31,250 = 18,750.

* I should put $31,250 into Fund X, and $18,750 into Fund Y.

4. Interest Rate: 6% each year; Starting Balance: $190; Time Passed: 9 years. How much interest has accrued if we are using simple interest? What is the new total balance?

Solution:

Simple Interest: I = PRT

P = principle = starting balance = $190

R = interest rate = 6%

T = time = 9 years

I = PRT

I = 190 × 6 / 100 × 9 = $103

New Balance = starting balance + interest accrued

= $190 + $103 = $293

5. Interest Rate: 1% daily

Starting Balance: $182

Time Passed: 7 days

How much interest has accrued if calculated as compound interest? What is the new total balance?

Solution:

Total Balance = P (1 + R) T

P = starting balance = $182

R = 1%

T = 7 years

Total balance = P (1 + R) T

= 182 × (1 + (1 / 100)) 7 = $195

Interest accrued = total balance - starting balance

= $195 - $182 = $13

6. Interest Rate: 3% annually

Starting Balance: $114

Time Passed: 10 years

How much interest has accrued if calculated as compound interest? What is the new total balance?

Solution:

Total balance = P (1 + R) T

P = starting balance = $114

R = 3%

T = 10 years

Total balance = P (1 + R) T = 114 × (1 + (3 / 100)) 10 = $153

Interest accrued = total balance - starting balance = $153 - $114 = $39

7. Clay has borrowed $5000 from the Wilmington Trust Co. in order to get a motorbike. He got the...