Norris Company has a line of credit with the Everett State Bank. Norris agreed to pay interest at an annual rate equal to 2% above the bank's prime rate. Funds are borrowed or repaid on the first day of each month and interest is paid in cash on the last day of each month. Activity to date is given as follows: The amount of interest paid at the end of March would be:

Question

Norris Company has a line of credit with the Everett State Bank. Norris agreed to pay interest at an annual rate equal to 2% above the bank's prime rate. Funds are borrowed or repaid on the first day of each month and interest is paid in cash on the last day of each month. Activity to date is given as follows:  The amount of interest paid at the end of March would be:

Quizplus · Accepted Answer

Norris repaid the $20,000 borrowed in January on March 1. Therefore, the company owes interest on the $30,000 borrowed in February at a rate of (3% + 2%); $30,000 x 5% x 1/12 = $125.

Norris Company Has a Line of Credit with the Everett