Asked by Bailey Ables on Jun 30, 2024
Verified
Given a 360-day year, the interest expense on a $2,000, 6%, 90-day promissory note payable is: (Do not round any intermediate calculations.)
A) $30.
B) $120.
C) $90.
D) some other amount.
Promissory Note Payable
A financial instrument that signifies a written promise by one party to pay a specific sum of money to another party under agreed terms.
360-Day Year
A simplified method of calculating interest for commercial loans or bonds that assumes each month has 30 days, resulting in a 360-day year.
- Perform calculations of interest on promissory notes employing the essential interest formula.
- Employ the suitable formula for interest calculation over several periods with a conventional 360-day year as the basis.
Verified Answer
DV
Dulmi VimangaJul 01, 2024
Final Answer :
A
Explanation :
The interest expense can be calculated using the formula: Interest = Principal x Rate x Time. Here, Principal = $2,000, Rate = 6% (or 0.06 as a decimal), and Time = 90/360 (since the interest rate is annual and the time is given in days for a 360-day year). Thus, Interest = $2,000 x 0.06 x (90/360) = $30.
Learning Objectives
- Perform calculations of interest on promissory notes employing the essential interest formula.
- Employ the suitable formula for interest calculation over several periods with a conventional 360-day year as the basis.