Simple and Effective Rates of Interest
Question 1
Distinguish between a flat and an effective
rate of interest.
Question 2
What is the simple interest earned on a principal of $5 900 at 7.25%p.a. over 4 years?
Question 3
How long would it take a principal of $3 500 to amount to $3 780 if it is invested at
4%p.a. simple interest?
Question 4
What principal will amount to $6 950 after 7 years at 3.5%p.a. simple interest?
Question 5
Anthony bought a used car for $16250 on terms, with a deposit of $7 500. The rest is
to be paid over 15 months at a flat rate of 6%p.a.
(a) What is the effective rate of interest?
(b) What is Anthony's monthly repayments?
Question 6
Discuss the effect of inflation on the level of interest rates.
