Question

During the current year, your company lent $40,083 at 5.2% for 12 months. If this loan was given on January 31st of the current year, calculate the total interest income that your company will report on this note this year. (round to the nearest dollar and do not enter dollar sign or comma. e.g. Enter $5,421.42 as 5421)

Answer 1

Total lent amount = 40,083.

Interest rate = 5.2% per annum.

The amount is given on January 31. So the company closes accounts on December 31 which means that 11 months income is to be recorded this year and balance one month income to be recorded next year.

11 month interest income =[(40,083 x 5.2%)/12]x11

11 month interest income = 1911.

Hence, 1911 is the correct answer.

SUMMARY:

One year interest = 40083 x 5.2%

11 month interest income = 1911.

Hence, 1911 is the correct answer.

Here, only the final result is rounded to the nearest dollar amount. If the intermediate calculations to be rounded to nearest dollar, the answer will be 1914 and if only final answer to be rounded to nearest dollar, then 1911 is the correct answer.