Derik bought a promissory note this morning. Find the maturity value of the promissory note for $1200.00 dated March 31, 2016, and due on August 31, 2026, if interest is 3.64% compounded quarterly.

Question

Quizplus · Accepted Answer

To find the maturity value of the promissory note, we need to use the compound interest formula:

A = P(1 + r/n)^(nt)

Where:
A = maturity value
P = principal (initial amount borrowed or invested)
r = annual interest rate (as a decimal)
n = number of times the interest is compounded per year
t = time (in years)

In this case:
P = $1200.00
r = 3.64% = 0.0364
n = 4 (since interest is compounded quarterly)
t = 10 years (from March 31, 2016 to August 31, 2026)

So, plugging in the values:

A = $1200.00(1 + 0.0364/4)^(4*10)
A = $1750.28

Therefore, the maturity value of the promissory note is $1750.28. The correct answer is C.

Derik Bought a Promissory Note This Morning