A company borrowed $16,000 by signing a 4-month promissory note at 12%. The amount of interest to be paid at maturity is $640.

Question

Quizplus · Accepted Answer

We can use the formula:

Interest = Principal x Rate x Time

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

Since the loan is for 4 months, or 4/12 = 1/3 of a year, we can plug in the values we know:

$640 = $16,000 x 0.12 x 1/3

Solving for the unknown variable, we get:

$640 = $640, which is true.

So the answer is A) True, the amount of interest to be paid at maturity is indeed $640.

A Company Borrowed $16,000 by Signing a 4-Month Promissory Note