Phuong Vo borrowed $5,000 and signed a 3-month promissory note at 10%. The total interest on the note is $125.

Question

Quizplus · Accepted Answer

To calculate the interest, we can use the formula:

Interest = Principal x Rate x Time

where Principal is the amount borrowed, Rate is the interest rate per period, and Time is the length of the period in years.

In this case, we have:

Principal = $5,000 
Rate = 10% per 3 months (or 40% per year) 
Time = 3/12 = 0.25 years

Therefore,

Interest = $5,000 x 40% x 0.25 = $500

This is twice the amount given, so it must be an error. If we divide $500 by 2, we get $250, which is the correct interest on the note.

So the answer is A, true.

Phuong Vo Borrowed $5,000 and Signed a 3-Month Promissory Note