{"id":558,"date":"2025-05-08T05:04:28","date_gmt":"2025-05-08T05:04:28","guid":{"rendered":"https:\/\/yaveni.com\/blog\/?p=558"},"modified":"2025-05-08T05:04:29","modified_gmt":"2025-05-08T05:04:29","slug":"a-company-receives-a-10-120-day-note-for-1500","status":"publish","type":"post","link":"https:\/\/gaviki.com\/blog\/a-company-receives-a-10-120-day-note-for-1500\/","title":{"rendered":"A company receives a 10%, 120-day note for $1,500"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">A company receives a 10%, 120-day note for $1,500. The total interest due on the maturity date is:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A. $50.00.<br>B. $150.00.<br>C. $75.00.<br>D. $37.50.<br>E. $87.50.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><strong>The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To calculate the total interest due on a note, we use the formula for <strong>simple interest<\/strong>:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">$$<br>\\text{Interest} = \\text{Principal} \\times \\text{Rate} \\times \\frac{\\text{Time}}{360}<br>$$<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Given:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Principal = \\$1,500<\/li>\n\n\n\n<li>Annual Interest Rate = 10% = 0.10<\/li>\n\n\n\n<li>Time = 120 days<\/li>\n\n\n\n<li>Financial institutions often use a 360-day year for interest calculations.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Step-by-step Calculation:<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">$$<br>\\text{Interest} = 1500 \\times 0.10 \\times \\frac{120}{360}<br>$$<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">$$<br>\\text{Interest} = 1500 \\times 0.10 \\times 0.3333<br>$$<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">$$<br>\\text{Interest} = 1500 \\times 0.03333 = 50.00<br>$$<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Correct Answer:<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>A. \\$50.00<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">When a company receives a promissory note, it is agreeing to be paid a certain amount (called the <strong>principal<\/strong>) plus interest after a specified period. In this case, the note has a face value (principal) of \\$1,500 and carries a 10% annual interest rate for 120 days.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The simple interest formula is used because this is a short-term note and it does not compound. The 360-day year convention (also known as a <strong>banker&#8217;s year<\/strong>) simplifies interest calculations in financial contexts. Rather than using 365 days, using 360 allows easier computation and is a standard practice.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The 120-day period is one-third of a 360-day year. So, only one-third of the annual interest (10%) is earned. That\u2019s:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">$$<br>10\\% \\div 3 = 3.33\\%<br>$$<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Then, 3.33% of \\$1,500 is:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">$$<br>0.03333 \\times 1500 = 50<br>$$<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Thus, when the note matures in 120 days, the <strong>total interest due<\/strong> will be <strong>\\$50.00<\/strong>, making that the correct and accurate answer.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A company receives a 10%, 120-day note for $1,500. The total interest due on the maturity date is: A. $50.00.B. $150.00.C. $75.00.D. $37.50.E. $87.50. The correct answer and explanation is : To calculate the total interest due on a note, we use the formula for simple interest: $$\\text{Interest} = \\text{Principal} \\times \\text{Rate} \\times \\frac{\\text{Time}}{360}$$ Given: [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-558","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/558","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/comments?post=558"}],"version-history":[{"count":1,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/558\/revisions"}],"predecessor-version":[{"id":559,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/558\/revisions\/559"}],"wp:attachment":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/media?parent=558"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/categories?post=558"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/tags?post=558"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}