Assuming a 360-day year, the interest charged by the bank, at the rate of 6%, on a 90-day, discounted note payable of $100,000 is
A) $6,000
B) $1,500
C) $500
D) $3,000

Question

Quizplus · Accepted Answer

The formula for calculating interest on a discounted note payable is:

Interest = Principal x Rate x Time

Where:
Principal = $100,000
Rate = 6%
Time = 90/360 (since it is a 360-day year and the note is for 90 days)

Plugging in the values:

Interest = $100,000 x 6% x 90/360
Interest = $1,500

Therefore, the interest charged by the bank on the note is $1,500.

Assuming a 360-Day Year, the Interest Charged by the Bank