Asked by Martha Lucia on Jun 17, 2024
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A contract requires payments of $2,000 and $3,000, 90 days and 120 days, respectively, from today. What is the value of the contract today if the payments are discounted to yield a rate of return of 12% simple interest?
A) $4,824.06
B) $4,828.66
C) $4,831.48
D) $4,837.87
E) $5,177.53
Discounted
The reduction applied to the face value or current price of an item or financial instrument, taking into account factors such as time, interest rate, and risk.
Rate of Return
The profit or deficit from an investment during a certain timeframe, represented as a portion of the investment's starting price in percentage terms.
Simple Interest
A financial term referring to a method of calculating the interest charge on a loan or investment based on the original principal amount, the interest rate, and the time the loan or investment is made for.
- Determine the issue price and selling price of financial instruments using simple interest calculations.
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Learning Objectives
- Determine the issue price and selling price of financial instruments using simple interest calculations.
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