Desiree Brown borrowed $50,000 on a 90-day 8% note. Desiree paid $3,000 toward the note on day 40. On day 60 she paid an additional $4,000. Using the U.S. Rule, Desiree's adjusted balance after the first payment is:
A)$1,008.89
B)$48,008.89
C)$47,444.44
D)$44,744.44
E)None of these

Question

Quizplus · Accepted Answer

To calculate the adjusted balance using the U.S. Rule, we need to first determine the interest on the original $50,000 for the full 90 days:

$50,000 x 0.08 x (90/360) = $1,200

This means that Desiree owes $1,200 in interest for the entire 90 days.

Next, we need to calculate the interest on the remaining balance after the first payment of $3,000 on day 40:

($50,000 - $3,000) x 0.08 x (50/360) = $444.44

This means that Desiree accrued $444.44 in interest from day 40 to day 90.

Finally, we need to calculate the interest on the remaining balance after the second payment of $4,000 on day 60:

($47,000 - $4,000) x 0.08 x (30/360) = $253.33

This means that Desiree accrued $253.33 in interest from day 60 to day 90.

To find the adjusted balance, we add up the original principal, the interest for the full 90 days, and the interest accrued after each payment:

$50,000 + $1,200 + $444.44 + $253.33 = $51,898.77

Therefore, the answer is C) $47,444.44, which represents the remaining balance after the first payment.

Desiree Brown Borrowed $50,000 on a 90-Day 8% Note