Assuming a 360-day year, when a $20,000, 90-day, 5% interest-bearing note payable matures, total payment will be
A) $21,000
B) $1,000
C) $20,250
D) $250

Question

Quizplus · Accepted Answer

The interest on the note can be calculated using the simple interest formula:

Interest = Principal x Rate x Time
where Principal is $20,000, Rate is 5% per year, and Time is 90/360 years (since it's a 90-day note and there are 360 days in a year).

Interest = $20,000 x 0.05 x (90/360) = $250

Therefore, the total payment at maturity will be the sum of the principal and the interest:

Total payment = Principal + Interest = $20,000 + $250 = $20,250

Hence, the answer is option C.

Assuming a 360-Day Year, When a $20,000, 90-Day, 5% Interest-Bearing