Question

Your business signs a ninety-day promissory note for $1,000 at 4% monthly interest. How much interest will you have to pay on a collect basis? $

Answer 1

90 days=3 months
I=1,000×0.04×3=120

Answer 2

Interest = $120

Explanation:

Given : Your business signs a ninety-day promissory note for $1,000 at 4% monthly interest.

To find : How much interest will you have to pay on a collect basis?

Solution :

Applying interest formula,

`I=P* R* T`

Where I is the interest

P is the principal = 1000

R is the rate = 4%=0.04 monthly interest

T is the time 90 days

Time into months

1 month = 30 days

`1 \text{day}=(1)/(30) \text{months}`

`90\text{day}=(90)/(30)=3 \text{months}`

Substitute all the value,

`I=P* R* T`

`I=1000* 0.04* 3`

`I=120`

The interest is $120.