A firm arranged for a 120-day bank loan at an annual rate of interest of 10 percent. If the loan is for $100,000, how much interest in dollars will the firm pay? (Assume a 360-day year.)

Question

Quizplus · Accepted Answer

The interest formula for a bank loan is: 
Interest = Loan amount x Annual interest rate x Time period 
where time period is measured in years. 
In this case, the loan amount is $100,000 and the annual interest rate is 10%. Since the loan is for 120 days, the time period is 120/360 = 1/3 year. 
Therefore, the interest paid is: 
Interest = $100,000 x 0.10 x 1/3 = $3,333 
So, the best choice is C.

A Firm Arranged for a 120-Day Bank Loan at an Annual