On October 1,2015,Bill Burns borrowed $170,000 from the New National Bank on a 6-month,6% note.Assuming no interest has been recorded yet,what is the amount of accrued interest as of December 31,2015?
A) $5,100
B) $2,550
C) $10,200
D) $7,650

Question

Quizplus · Accepted Answer

To calculate the accrued interest, we first need to determine the interest for each month.

6% annual interest is equivalent to a monthly interest rate of 0.5% (6% / 12 months).

For October, the interest is calculated as: 
$170,000 x 0.5% = $850

For November, the interest is calculated on the original principal plus the interest from October: 
($170,000 + $850) x 0.5% = $930

For December, the interest is calculated on the original principal plus the interest from October and November: 
($170,000 + $850 + $930) x 0.5% = $1,015

The accrued interest as of December 31 is therefore the sum of the interest from each month: 
$850 + $930 + $1,015 = $2,795

Therefore, the best choice is B.

On October 1,2015,Bill Burns Borrowed $170,000 from the New National