A company borrowed $16,000 by signing a 120-day promissory note at 12%. The total interest on the note is $640.
$16,000 * 0.12 * 120/360 = $640

Question

Quizplus · Accepted Answer

The formula for calculating simple interest is principal x rate x time (in years). In this case, the principal is $16,000, the rate is 12%, and the time is 120/360 (since 120 days is equivalent to 4 months or 1/3 of a year). Plugging these values into the formula gives: $16,000 x 0.12 x 120/360 = $640, which matches the given total interest on the note, confirming that the statement is true.

A Company Borrowed $16,000 by Signing a 120-Day Promissory Note