Chapter 8 Simple Interest

U.S. Home has earned "Builder of the Year" honors in 1972, 1979, and again in 1994. This distinguishes U.S. Home as the nation's only three-time winner of this prestigious award. U.S. Home has grown into the national home-building company its founders envisioned. The company has provided quality homes in distinctive neighborhoods throughout the nation. Throughout the company's history, it has built more than 275,000 homes, and has become one of the nation's largest builders of homes for retirees and second homes for active adults. The management bases the success of the company on the ability to please one customer at a time.

Starting out in 1954 as Accurate Construction Company, this company rapidly became one of the principal homebuilders in the state of New Jersey. The name U.S. Home and Development was adopted in 1959.

A management-development program was started in 1977 to train and expand quality management. As of 1999, members of the company's division and corporate management have an average tenure of 17 years each. This is attributed to the management-development program.

Buying a home is a major purchase decision. U.S. Home has put together programs to take the guesswork out of the home-buying process, and increase customer satisfaction. This company has a distinctive way of making sure the customer's standards are met.

This information and more can be found at www.ushome.com.

Problem:

Preparation:

In preparation for this problem,

• Locate and identify relevant details and facts from www.federalreserve.gov
• Be creative, make associations between apparently unconnected ideas. For instance, why would the Federal Reserve be mentioned in Chapter 8 of your textbook?

Questions:

1. U.S. Home is the nation's only three-time winner of the prestigious "Builder of the Year" award. One reason for U.S. Home's great success is their commitment to customer satisfaction. Visit www.ushome.com/CustomerSatisfaction.htm, and use the information you find there to help you answer the following essay question.

"Customer Satisfaction System sets us apart from others" is a motto at U.S. Home. Explain what steps are taken by U.S. Home to meet the needs of the customer. Do you think the steps taken to ensure customer satisfaction by U.S. Home would be beneficial in other service businesses? Recall a situation in which you experienced poor service. Explain how one or more of the steps of U.S. Home's Customer Satisfaction System may have improved the situation.

2. Monetary policy refers to the Federal Reserve bank's actions to adjust the money supply and change interest rates. Producers and consumers alike keep a close eye on interest rates, as fluctuations can dramatically affect the total cost of borrowing money. Look at the following simple-interest formulas.

$5000 X .09 X 5 years = $2250
$5000 X .18 X 5 years = $4500

Would you rather borrow $5000 for five years at 9% interest or 18% interest? Since it would save you $2250, you would most certainly choose the 9% rate. Calculate the interest for the following problems.

1. $3500 borrowed at 12% for 8 months.
2. $4000 borrowed at 9% for 45 days.
3. $6000 borrowed at 9% for 4 months

3. Keeping informed about the Federal Reserve and monetary policy is not just for economics scholars. Calculating interested paid, interested earned, how compound interest works compared to simple interest, and calculating discounts and maturity values are all important skills. Since the Federal Reserve has such an effect on business and personal finances, it is beneficial to know a little more about this government agency. Visit www.federalreserve.gov, and use the information you find there to answer the following questions.

1. According to the Web site, the Federal Reserve's duties fall into four general areas. What are these areas?
2. How many Federal Reserve districts are there, and where are the Federal Reserve banks located?
3. The federal Reserve Act outlines regulations regarding the criteria and term for chief executives of Federal Reserve banks. Summarize these criteria.

Include the date in your answers.

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