Question

On May 17, Jane took out a loan for $33,000 at 6% to open her law practice office. The loan will mature the following year on January 16. Using the ordinary interest method, what is the maturity value due on January 16?

a.$34,342
b.$34,320
c.$34,323.62
d.$34,254
d.None of these

Answer 1

b.$34,320

Step-by-step explanation:

Ordinary interest ; Use simple interest formula to fins amount

Amount (A) = Simple interest +Principal , and

Simple interest (S.I) = Principal * rate *time i.e. P*r*t

Principal = $33,000

rate = 6%

time in years = 8/12 note: 8 months, counted from May 17 to Jan 16)

Amount = [33,000*0.06 *
`(8)/(12)` ]+ 33,000

A = 1,320 + 33,000

A = 34,320

Therefore, the maturity value would be $34,320