Question No.1
The list price for a radio is 22% higher than its net price. If the net price is $29.00, what is the
list price? What is the amount of the trade discount?
Answer- 1
Net price of Radio= $29
List price is22 % higher
i.e. List price/ Net price = 122/100
Therefore List price = 122/100 * 29
The calculation is accomplished as below:
List Price $ 35,38
Net Price $ 29,00
Trade discount (amount) $ 6,38
Trade discount (percentage) 18,03%
Question No.2
A certified public accountant discounts a bill to $294.00 when a client pays
in cash, within 10 days. If the cash discount is 1.5%, how much would the customer
have paid if he or she had not been eligible for the discount? Report the result to the
nearest penny.
Answer- 2
Discount = Bill amount * 1.5/100
Bill amount = Discounted value + Discount = Discounted amount + Bill amount * 1.5/100
Discounted value = Bill amount (1-1.5/100) = Bill amount * 98.5/100
or: Bill amount = Discounted value * 100/98.5
The above calculation is accomplished in Excel worksheet as below:
Un-discounted bill $ 298,48
Percentage discount 1,50%
Discounted bill amount $ 294,00
Amount of discount $ 4,48
Question No.3
Bill’s Accounting is taking out a lease on $2,000 worth of computing equipment and office
furniture, over a two year period. The bank charges 8.25% interest annually. Compute the
interest paid and the total amount paid for the lease.
PAGE- 2Answer- 3
Principal repaid at the end of the period
Principal for first year as well as second year = $ 2000
Annual Interest is calculated by the formula: I = P * r / 100
Where ‘r’ is the annual rate of interest
Here ‘r’ = 8.25
Therefore annual interest of $ 2000 is: 2000 * 8.25/100 =
Interest for 2 years = Annual interest * 2
The above calculation is accomplished in Excel worksheet as below:
Amount of loan $ 2 000,00
Annual interest $ 165,00
Interest for 2 years $ 330,00
TOTAL AMOUNT PAYABLE $ 2 330,00
Question No.4
You need to borrow $5,000 for 2.33 years. Originally, the bank offers a 6.5% rate. Then,
after some negotiation, they are willing to drop the rate to 5.5%. What savings in interest will you
have as a result of the rate reduction?
Answer- 4
Annual Interest is calculated by the formula: I = P * r / 100
Where ‘I’ is the interest amount and ‘r’ is the annual rate of interest
Here ‘r’ = 6.5 in one case and 5.5 in the other case
Principal amount $ 5 000,00
Period (Years) 2,33
Original interest rate (Percent) 6,50%
Negotiated interest rate (Percent) 5,50%
Annual interest (case-1) = 5000 * 6.5/ 100= Say ‘x”
Interest for 2.33 years = ‘x” *2.33
Annual interest (case-2 = 5000 * 5.5/100= Say ‘y”
Interest for 2.33 years= ‘y’ * 2.33
Calculation in Excel Worksheet
Annual Int. Annual Int. Annual Savings for
6,50% 5,50% savings 2.33 years
Principal amount $ 5 000,00 $ 325,00 $ 275,00 $ 50,00 $ 116,50
Question- 5 PAGE- 3A consumer loan is made at 10.0% over a 3.5 year period. If $2,125 in interest is paid, what
is the principal? What is the total amount paid by the consumer? Report the results to the
nearest penny.
Answer- 5
The amount payable against a loan taken on simple interest is given by the following equation
I = P * r /100 * n
Where
P is the principal
r is the rate of annual interest, and
n is the period in years
Based on above equation ‘ P ‘ = {‘ I ‘/ (r/ 100)} / n = (100 * ‘ I ‘ / r ) / n
i.e.: = ‘I’ * {(100 * 2125 / (10/100)} / n = 2125 * 10 / 3.5
Principal amount (?) = ‘P’
Rate of interest= 10% p.a
Period of loan= 3.5 years
THE ABOVE IS ACCOMPLISHED IN EXCEL AS BELOW:
Rate of interest 10,00%
Period of loan (years) 3,50
Interest paid $ 2 125,00
Principal amount (?) = ‘p’ $ 6 071,43
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