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

Question

Quizplus · Accepted Answer

We can use the formula:

total interest = principal x rate x time

where principal is the amount borrowed, rate is the interest rate, and time is the duration of the loan in years.

Converting six months to a fraction of a year:

time = 6/12 = 0.5

Plugging in the given values:

$25 = $10,000 x 0.05 x 0.5

Simplifying:

$25 = $250

This is a contradiction, so the statement is false.

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