Question

The total interest charged on a $300,000 note payable, at the rate of 8%, on a 60-day note would be:

Select one:

a. $17,776.

b. $6,000.

c. $24,000.

d. $4,000.

Answer 1

The interest is charged on the principal amount of the loan i.e note payable at a certain percentage of interest given for a specific period of time.

Here the principal being a note payable of $ 300,000 , the rate of interest is 8% , and the time period is 60 days, assuming 360 days in a year,

The Interest Amount = Note Payable * Rate * period in days/ 360

Interest Amount charged = $300,000 * 8% * 60/365 = $ 24000 * 60/ 360 = $ 4,000.

Thus the correct option is ---------D i.e $ 4,000.

Note : Here 360 days are assumed for easy calculation as options are not in decimal and if 365 days are taken the interest amount would have been = $ 3945.21 i,e ( 300000 * 8%*60/365).

Feel free to comment doubts if any..