# Question

Comparison of Simple and Compound Interest On June 30, 2010, Rolloff Inc. borrowed $25,000 from its bank, signing a 6% note. Principal and interest are due at the end of two years.

Required

1. Assuming that the note earns simple interest for the bank, calculate the amount of interest accrued on each of the following dates: December 31, 2010 December 31, 2011 June 30, 2012

2. Assume instead that the note earns 6% for the bank but is compounded semiannually. Calculate the amount of interest accrued on the same dates as in part (1).

3. How much additional interest expense will Rolloff have to pay with semiannual interest?

Required

1. Assuming that the note earns simple interest for the bank, calculate the amount of interest accrued on each of the following dates: December 31, 2010 December 31, 2011 June 30, 2012

2. Assume instead that the note earns 6% for the bank but is compounded semiannually. Calculate the amount of interest accrued on the same dates as in part (1).

3. How much additional interest expense will Rolloff have to pay with semiannual interest?

## Answer to relevant Questions

Investment with Varying Interest Rate Trena Thompson invested $2,000 in a financial institution on January 1, 2010. She leaves her investment in the institution until December 31, 2014. How much money does Trena accumulate ...Comparison of Alternatives Darlene Page’s grandparents want to give her some money when she graduates from high school. They have offered Darlene the following three choices:a. Receive $16,000 immediately. Assume that ...Warranty Cost Estimate John Walton is an accountant for ABC Auto Dealers, a large auto dealership in a metropolitan area. ABC sells both new and used cars. New cars are sold with a five-year warranty, the cost of which is ...Is there always a gain or loss when bonds are redeemed? How is the gain or loss calculated?Classification of Long-Term Liabilities Which of the following would normally be included in the Long-Term Liability category of the balance sheet? Accounts Payable Bonds Payable Accrued Expenses Current Maturities of ...Post your question

0