Question

Assuming a 360-day year, when a $20,000, 90-day, 5% interest-bearing note payable matures, total payment will be

a. $20,250
b. $1,000
c. $21,000
d. $250

Answer 1

In a 360-day year: 90 : 360 = 1/4 of a year. p = 5% = 0.05Interest: $20,000 * 0.05 * 1/4 = $1,000 * 1/4 = $250So the interest is $250 for 90 days.Finally: $20,000 + $250 = $20,250Answer:Total payment will be a. $20,250.