Question

On March 1, 2018, Mandy Services issued a 9% long-term notes payable for $15,000. It is payable over a 3 - year term in $5,000 principal installments on March 1 of each year, beginning March 1, 2019. Each yearly installment will include both principal repayment of $5,000 and interest payment for the preceding one -year period. What is the amount of total cash payment that Mandy will make on March 1, 2019? O

A. $5,675
B. $6,350
C. $15,000
D. $5,000

Answer 1

Correct option is (B)

Step-by-step explanation:

Given:

Principal amount = $15,000

Interest rate = 9% or 0.09

Maturity = 3 years

Every year Mandy Services make payment of $5,000 of principal amount and interest accrued in the previous year. In 2019, Interest accrued for 2018 would be:

Interest = Principal × rate × time

= 15,000 × 0.09 × 1

= $1,350

Total payment made by Mandy in 2019 = 5,000 + 1,350

= $6,350