A 1-year,$30,000,10 percent note is signed on May 1.If the note is repaid on October 1 of the same year,how much interest expense is incurred?

Question

Quizplus · Accepted Answer

The interest expense is calculated using the formula: Principal x Rate x Time. Here, the principal is $30,000, the annual interest rate is 10%, and the time is 5 months (from May 1 to October 1), which is 5/12 of a year. So, the interest expense is $30,000 x 0.10 x (5/12) = $1,250.

A 1-Year,$30,000,10 Percent Note Is Signed on May 1