Merchant's rule musings

[jonah2.0]

[from this thread]

Beer soaked ramblings follow.

Denis,
That's equivalent to the Merchant Rule but that rule states things a little differently. The Merchant Rule says something to the effect of
All payments made before the settlement date shall be treated as though they had earned interest at the prevailing rate of the note from the date of payment to the settlement date.
Thus the way I gave my solution. The problem the OP ran into is they did not take the proper length of time into account. Their solution properly should have been
X=$6000(1+.06*4)-$3000(1+.06*2)-$3000(1+.06*1)

EDIT: To try to explain the equivalence we have
Simple interest first two years on 6K = 720 leaving 3K owing
Simple interest year 3 on 3K = 180 leaving 0 owing
Simple interest remaining years to settlement date on 0K = 0
Total interest owing on settlement date $900

Aye Sir Ishuda, I say aye.
Alternatively, we could also say that the so called merchant rule is basically the simple interest version of the retrospective method for determining the outstanding balance of a loan in compound interest problems (as applied by Sir Denis in several posts).

 

[jonah2.0]

Beer soaked ramblings follow.

Denis,
That's equivalent to the Merchant Rule but that rule states things a little differently. The Merchant Rule says something to the effect of
All payments made before the settlement date shall be treated as though they had earned interest at the prevailing rate of the note from the date of payment to the settlement date.
Thus the way I gave my solution. The problem the OP ran into is they did not take the proper length of time into account. Their solution properly should have been
X=$6000(1+.06*4)-$3000(1+.06*2)-$3000(1+.06*1)

EDIT: To try to explain the equivalence we have
Simple interest first two years on 6K = 720 leaving 3K owing
Simple interest year 3 on 3K = 180 leaving 0 owing
Simple interest remaining years to settlement date on 0K = 0
Total interest owing on settlement date $900

Aye Sir Ishuda, I say aye.
Alternatively, we could also say that the so called merchant rule is basically the simple interest version of the retrospective method for determining the outstanding balance of a loan in compound interest problems (as applied by Sir Denis in several posts).

 

[Denis]

And He opined timorously: be it nameth anything thou wisheth,
it needeth to computeth to 900 smakaroos

 

[jonah2.0]

Beer soaked ramblings follow.

And He opined timorously: be it nameth anything thou wisheth,
it needeth to computeth to 900 smakaroos

'Tis so and the moral of that is--"Oh, 'tis love, 'tis love, that makes the world go round!"

 

[jonah2.0]

Beer soaked ramblings follow.

Nay Sir Denis, I say nay.
I be merely in love with a certain retired Czech model named Katerina courtesy of those mildly annoying popups.
She is so beautiful.
I love her.