Frankenstein Enterprises received two notes from customers for sales that Frankenstein made in 2018. The notes included:
Note A: Dated 5/31/2018, principal of $120,000 and interest due 3/31/2019.
Note B: Dated 7/1/2018, principal of $200,000 and interest at 8% annually, due on 4/1/2019.
Frankenstein had accrued a total of $14,400 interest receivable from these notes in its 12/31/2018 balance sheet.
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The annual interest rate on Note A is closest to:

Question

Frankenstein Enterprises received two notes from customers for sales that Frankenstein made in 2018. The notes included: 
Note A: Dated 5/31/2018, principal of $120,000 and interest due 3/31/2019.
Note B: Dated 7/1/2018, principal of $200,000 and interest at 8% annually, due on 4/1/2019.
Frankenstein had accrued a total of $14,400 interest receivable from these notes in its 12/31/2018 balance sheet.
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The annual interest rate on Note A is closest to:

Quizplus · Accepted Answer

Note B accrued interest for six months during 2018: $200,000 × .08 × 6/12 = $8,000. The rest of the interest accrued, $6,400 was from Note A, which was held for seven months in 2018. So, we have the following: $120,000 × annual interest rate × 7/12 = $6,400. Thus, the annual interest rate on Note A would be ($6,400/120,000) × 12/7 = 9.14%.

Frankenstein Enterprises Received Two Notes from Customers for Sales That