Michigan Bank lends Detroit Furniture Company $80,000 on December 1. Detroit Furniture Company signs a $80,000, 6%, 4-month note. The total cash paid for interest (only)at maturity of the note is: (Round your final answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

The interest on the note is calculated using the formula: Interest = Principal x Rate x Time. Here, the principal is $80,000, the rate is 6% (or 0.06), and the time is 4/12 of a year (since the note is for 4 months). Therefore, the interest is $80,000 x 0.06 x (4/12) = $1,600.

Michigan Bank Lends Detroit Furniture Company $80,000 on December 1