INTRODUCTORY

MATHEMATICS AND
STATISTICS
TH

EDITION

SOLUTIONS MANUAL

John S. Croucher

Chapter 5
Simple interest
Quick Quiz
1. (d)
2. (a)
3. (b)
4. (c)
5. (c)
6. (c)
7. (d)
8. (c)
9. (a)
10. (b)

Practice Questions
1. Total interest earned = $1125
2. Rate = 3.75% per annum
3. Rate = 120% per annum
4. Flat rate of interest = 16.67%
5. Effective rate of interest = 32%
6. Equivalent rate of interest = 7.56%
7. Flat rate of interest = 4.1%
8. Annual rate of simple interest = 3.2%
9. Effective rate/flat rate =

2N
( N + 1) + ( N 1)
N 1
=
= 1+
1 since number of
N +1
N +1
N +1

repayments is at least 1 thus effective rate flat rate

10. Reserve Bank of Australiahttp://www.rba.gov.au/

Introductory Mathematics and Statistics 6e, John S Croucher, 2013 McGraw-Hill Education (Australia) Pty Ltd
Solutions Manual, Chapter 5

Exercises
5.1

(a) Simple interest = $4000 0.08 4 = $1280 (b)

Simple interest = $12 500 0.06 5 = $3750 (c)
Simple interest = $25 000 0.07 3 = $5250

5.2

(a) Rate of simple interest =

$100 = 0.02 or 2%
$1000 5
2

(b) Rate of simple interest = $1600 0.1066 or 10 3%

$5000 3
(c) Rate of simple interest = $312.50 = 0.025 or 2.5%
$2500 x 5
5.3

(a) r = 3.25%

5.4

(a) Period =

(b) Period =

(b) r = 7.6%

(c) r = 9.5%

$300
= 2 years
$3000 0.05
$1023.75 = 3.5 years
$6500 0.045

or 3 years 6 months
(c) Period =

$12 397.50
= 7.25 years
$18 000 0.095 or 7

years 3 months
5.5

(a) T = 3 years 4 months (b) T

= 5 years 10 months (c) T = 6
years

5.6

(a) Total simple interest = $600 0.075 1.25 = $56.25

(b) Maturity value of principal = $600 + $56.25 = $656.25

5.7

(a) Total interest = $845.25

(b) Maturity value = $3145.25

5.8

Amount to invest =

5.9

P=

$3000
$1804.51
1 + 0.1325 5

$10000
= $4854.37
1 + 0.1325 8

Introductory Mathematics and Statistics 6e, John S Croucher, 2013 McGraw-Hill Education (Australia) Pty Ltd
Solutions Manual, Chapter 5

5.10
Month
March 2013
April 2013
May 2013
June 2013
Total

Interest Due ($)

0
0.61875
0.61875
0.87083
2.11

Month
March 2013
April 2013
May 2013
June 2013
Total

Interest Due ($)

0
1.04
1.04
1.46
$3.54

5.11

5.12

(a) Total simple interest = $3500 0.0625 3 = $656.25

(b) Equivalent effective rate of interest = 2 36 0.0625 0.1216 or 12.16%
36 + 1

5.13

Equivalent flat rate of interest = 181 0.14 = 0.070 or 7.0%

360

5.14

Equivalent flat rate of interest = 181 0.185 = 0.093 or 9.30%

360

5.15

R = 31 0.14 = 0.072 or 7.2%

60

5.16

(a) Total cost of sewing machine = ($38.50 24) + (0.16 $1000)

= $924 + $160 = $1084
(b) Total interest paid = $1084 - $1000 = $84
(c) Flat rate of interest =

$84
= 0.050 or 5%
$840 2

(d) Effective rate of interest = 2 24 0.050 = 0.096 or 9.6%

24 + 1
5.17

(a) Total cost = ($12.25 48) = $588

(b) Total interest paid = $588 $500 = $88
(c) Flat rate of interest =

88
= 0.044 or 4.4%
500 4

(d) Effective rate of interest = 2 48 0.044 = 0.0862 or 8.62%

48 + 1
Introductory Mathematics and Statistics 6e, John S Croucher, 2013 McGraw-Hill Education (Australia) Pty Ltd
Solutions Manual, Chapter 5

5.18

Minimum annual rate of interest =

$1250 = 0.0893 or 8.93%

$3500 4

5.19

Time =

5.20

(a) Equivalent flat rate of interest = 33 0.155 = 0.08 or 8.0%

64

$15 000
= 6.32 years
$25 000 0.095

(b) Total simple interest = $20 000 0.08 8 = $ 12 800

5.21

Time =

$ 5312. 50
$20 000 0.0625

= 4.25 years = 4 years 3 months

5.22

Time = 1
= 13.33 years or 13 years 4 months
0.075

5.23

Rate of interest =

5.24

(a) Total simple interest = $64 000 0.085 6 = $32 640

$2250
= 0.0375 or 3.75% per annum
$5000 (12)

(b) Effective rate of interest = 2 72 0.085 = 0.168 or 16.8%

73
(c) Total cost = $16 000 + $64 000 + $32 640 = $112 640
5.25

Annual interest rate = 73%

5.26

(a) Total interest earned= $4 000 0.05 365 = $65.75

120

(b) Total amount repaid = $4 065.75

5.27

(a) 23 Sep 2013

(b) Total interest = $149.44
(c) Repayment = $91.61 per week

5.28

259

(a) Total repayment = 3240 (1 + 0.05 365 ) = $3354.95

Repayment per week = $3354.95 = $90.67
37

(b) Total payment = $3354.95 + $360 = $3714.95

Under the deal in Exercise 5.27 the customer would pay a total of $3749.44.
Hence this new deal is slightly better since it would save $34.49 in interest.
5.29

(a) Amount required = $8268.73

Introductory Mathematics and Statistics 6e, John S Croucher, 2013 McGraw-Hill Education (Australia) Pty Ltd
Solutions Manual, Chapter 5

(b) Repayment = $1378.12 per month

5.30

(a) Let total interest to borrow = $I. Then I = (25 000 + I) 0.065 1.5
which yields I = 2 700.83. The consultant should borrow $27 700.83.
(b) Monthly repayments = $27 700.83 = $1538.94
18

5.31

(a) Interest earned = $50 000 (0.0725)(4.5) = $16 312.50

(b) Maturity value = $50 000 (1 + (0.0725)(4.5)) = $66 312.50

5.32

Equivalent flat rate = 7.04%

5.33

Flat rate of interest =

5.34

(a) Total interest = $108 000

301 0.175
= 8.78%
600

(b) Equivalent effective rate = 13.09%

5.35

(a) Total simple interest = $75 000 10 0.055 = $41 250

(b) Effective rate of interest = 40 0.055 = 0.1048 or 10.48%
21

5.36

(a) Flat rate interest = $14 250

Effective rate of interest = $13 837.50
(b) Take the effective rate, since the total interest payable is lower.

5.37

(a) Flat rate of interest = 6.5%

Total simple interest = $15 000 0.065 5 = $4875
Effective rate of interest = 12%
Equivalent flat rate of interest = 21 0.12 = 0.063
40
Total simple interest = $15 000 0.063 5 = $4725
(b) Therefore the hairdresser should take the effective rate of interest of 12% as the
total simple interest due is lower.

Introductory Mathematics and Statistics 6e, John S Croucher, 2013 McGraw-Hill Education (Australia) Pty Ltd
Solutions Manual, Chapter 5

5.38

(a)
Month

Minimum
balance ($)
0
150
150
150
650
325
325
325
325
355

Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct

Interest ($)
0
0.41
0.41
0.41
1.76
0.88
0.88
0.88
0.88
0.96

(b) Total interest = $7.47

5.39

(a)
Month
September 2012
October 2012
November 2012
December 2012
January 2013
February 2013
March 2013

Minimum monthly balance

0
500
500
320
320
320
520

Interest ($)
0
2.29
2.29
1.47
1.47
1.47
2.38

(b) Total interest = $11.37

5.40

No. The total interest will be $2700, so she will have only a total of $11 700, still
$300 short of her goal.

5.41

Simple interest = $28 500 0.006 7.5 = $1282.50

5.42

Amount Emily should invest now =

5.43

(a) Total simple interest = $20 000 0.08 10 = $16 000

$25 000
= $12 658.23
1 + 0.065 15

(b) Equivalent effective rate of interest = 2 120 0.08 = 0.159 or 15.90%

120 + 1
5.44

In this case, E = 0.11, R = 0.0645 and N is the unknown.

N=

E
2R E

0.11
= 5.79
2(0.0645) 0.11

Hence, 5.79 repayments would have to be made. This would be adjusted to

6 payments.

Introductory Mathematics and Statistics 6e, John S Croucher, 2013 McGraw-Hill Education (Australia) Pty Ltd
Solutions Manual, Chapter 5

5.45

Same as the answer to Exercise 5.44. The loan amount is irrelevant.

5.46

Amount Angela should invest now =

5.47

In this case, S = $25 000, R = 0.048 and T = 8.

P=

$25 000
1 + 0.048 8

$20 000
1 + 0.035 8

= $15 625.00

= $25 000 = $18 063.58

1.384

Hence she should invest $18 063.58 now in order to have $25 000 at the end of
8 years.
5.48

Annual interest payable = 4 $400 = $1600

Annual interest rate = 100 $1600 = 160%
$1000

5.49

(a) Rate of simple interest

=

$600
4
$1000 12

= 1.8 or 180%

(b) No. The rate of interest in Exercise 5.48 is a better deal for the client because
it is lower than the rate in Exercise 5.48.
5.50

Answer depends on the model of financial calculator selected.

5.51

P = $1900, R = 100 = 0.025, T = 8

2.5

I=PRT
= $1900 13thly balan
= $380

5.52

Rate of simple interest = $299.20 (1360 8) = 0.0275 or 2.75%

5.53

2 60
= 6%
61

R = 3.05%
5.54 Simple interest earned = $30 000 0.0565 4 = $6780
5.55 Check the answer is reasonable.
5.56 Simple interest earned = $160 000 5.25% 4

1
= $35 700
4

5.57 Annual simple interest charged = $1953.13 ($25 000 1.25) = 0.0625 or 6.25%

Introductory Mathematics and Statistics 6e, John S Croucher, 2013 McGraw-Hill Education (Australia) Pty Ltd
Solutions Manual, Chapter 5

5.58 P =

$40000
= $21276.6
1 + 5.5% 16

5.59 P = $18 000, T = 0.50, I = $1012.50

1012.50
R = = 18 000 0.50
= 0.1125 or 11.25%

5.60 (a) $31.80

(b) $31.80 6.75%

1
= $0.18
12

Introductory Mathematics and Statistics 6e, John S Croucher, 2013 McGraw-Hill Education (Australia) Pty Ltd
Solutions Manual, Chapter 5