Below Are Three Notes Payable

question 201

Essay

Below are three notes payable:
REQUIRED:
Part 1. For each of the notes, calculate the simple interest due at the end of the term.
Part 2. Now assume that the interest on the notes is compounded annually. Calculate the amount of interest due at the end of the term for each note.
Part 3. Finally, assume that the interest on the notes is compounded semiannually. Calculate the amount of interest due at the end of the term for each note.
Part 4. What conclusion can you draw from a comparison of your results of each of the three scenarios?

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of individuals or the economy increases, opposite to what is observed with a normal good.

Law of Supply

It states that, all else equal, an increase in the price of a good or service will lead to an increase in the quantity supplied.

Law of Demand

An economic principle stating that the quantity demanded of a good decreases as its price increases, all else being equal, and vice versa.

Diminishing Marginal Utility

Diminishing marginal utility is the principle stating that as a person consumes more of a good, the satisfaction gained from consuming each additional unit decreases.