On 1 November, Year 1, Noble Co. borrowed $80,000 from South Bank and signed a 12%, six-month note payable, all due at maturity. The interest on this loan is stated separately.

-How much must Noble pay South Bank on 1 May, Year 2, when the note matures?

Question

On 1 November,  Year 1, Noble Co. borrowed $80,000 from South Bank and signed a 12%, six-month note payable, all due at maturity. The interest on this loan is stated separately.

-How much must Noble pay South Bank on 1 May, Year 2, when the note matures?

Quizplus · Accepted Answer

To calculate the total amount Noble must pay on May 1, Year 2, we need to add the principal amount of the note ($80,000) to the interest accrued over the 360-day period. The interest can be calculated as follows:

Interest = Principal x Rate x Time 
where Rate = 9% and Time = 360/365

Interest = $80,000 x 0.09 x (360/365) = $4,800

Therefore, the total amount Noble must pay is $80,000 + $4,800 = $84,800, which corresponds to choice C.