Homework Answers
Answer to Question 1:
March 15 to October 15:
Outstanding Principal = $175,000
Interest Rate = 8%
Time Period = 16 (March) + 30 (April) + 31 (May) + 30 (June) +
31 (July) + 31 (August) + 30 (September) + 15 (October)
Time Period = 214 days
Interest Obligation = $175,000 * 8% * (214/365)
Interest Obligation = $8,208
October 15 to November 15:
Outstanding Principal = $175,000 - $100,000
Outstanding Principal = $75,000
Interest Rate = 8%
Time Period = 16 (October) + 15 (November)
Time Period = 31 days
Interest Obligation = $75,000 * 8% * (31/365)
Interest Obligation = $510
Total Interest Obligation = $8,208 + $510
Total Interest Obligation = $8,718
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