A promissory note for $7200.00 dated May 15, 2016, requires an interest payment of $740.00 at maturity. If interest is at 9.6% compounded monthly, determine the due date of the note.
A) 23 July 2016
B) 21 Sep 2016
C) 23 May 2017
D) 24 Aug 2017
E) 11 Oct 2018

Question

Quizplus · Accepted Answer

The due date of the note is 23 May 2017. This is because the note is for $7200.00 and the interest payment is $740.00. The interest rate is 9.6% compounded monthly. This means that the interest rate per month is 9.6% / 12 = 0.8%. The number of months until maturity is (23 May 2017 - 15 May 2016) / 30 = 12. Therefore, the total interest paid is $740.00 = $7200.00 * 0.8% * 12.

A Promissory Note for $7200