Frankenstein Enterprises received two notes from customers for sales that Frankenstein made in 2013. The notes included: Note A: Dated 5/31/2013, principal of $120,000 and interest due 3/31/2014.
Note B: Dated 7/1/2013, principal of $200,000 and interest at 8% annually, due on 4/1/2014.
Frankenstein had accrued interest receivable from these notes of $14,400 in its 12/31/2013 balance sheet. What is the annual interest rate on Note A?

Question

Quizplus · Accepted Answer

Note A has a principal of $120,000 and interest due of $14,400. The interest period is from 5/31/2013 to 3/31/2014, which is 10 months. The annual interest rate is therefore:$14,400 / $120,000 * 12 / 10 = 9.14%

Frankenstein Enterprises Received Two Notes from Customers for Sales That