A company borrowed $10,000 by signing a six-month promissory note at 5% interest. The amount of interest to be paid at maturity is $25.

Question

Quizplus · Accepted Answer

We can use the formula I = P*r*t to find the amount of interest paid, where I is the interest, P is the principal (in this case, $10,000), r is the interest rate (in decimal form, so 0.05), and t is the time in years (convert 6 months to 0.5 years).

Plugging in the values, we get: 
I = 10,000*0.05*0.5 = $250

Since the question says that the amount of interest to be paid at maturity is $25, this is clearly false. The actual interest paid is $250, not $25.

A Company Borrowed $10,000 by Signing a Six-Month Promissory Note