Question

On July​ 7, University Bank lent​ $560,000 to Jazz Music Shop on a 60​ day, 7% note. What is the maturity value of the​ note? (Use a​ 360-day year and round answers to the nearest​ dollar.)

Answer 1

To calculate the maturity value of the 60-day, 7% note, we need to calculate the interest earned by the note using the formula: Interest = Principal × Rate × Time. The maturity value is then the principal plus the interest earned.

Step-by-step explanation:

To calculate the maturity value of the note, we need to calculate the interest earned by the note over the 60-day period. The interest earned can be calculated using the formula: Interest = Principal × Rate × Time. In this case, the principal is $560,000, the rate is 7% and the time is 60 days.

First, we need to convert the time from days to years. Since a year is considered to have 360 days in this case, the time in years would be 60/360 = 1/6 years.

Using the formula, the interest earned would be: Interest = $560,000 × 7% × 1/6 = $6,160.

The maturity value of the note is the principal plus the interest earned, so the maturity value would be: Maturity Value = $560,000 + $6,160 = $566,160.

Answer 2

Answer: The maturity value of the note is $5,66,533.

We can arrive at the answer with the steps below:

The formula we use to calculate Maturity Value is:

`Maturity Value = Principal * ( 1+ (Rate * Time))`

In this question,

Principal = $560,000

Interest = 7% per year

Time period = 60 days.

Number of days in a year = 360 days (given in the question).

Substituting the value of the time period calculated above in the Maturity Value formula we have:

Maturity Value = $560,000 × (1+(0.07×60/360))

Maturity Value = $560,000 × (1+(0.07×1/6))

Maturity Value = $560,000 × 1.011666667

Maturity Value = $566533.3333