Question

Sandra borrowed $5,000 on a 120-day 5% note. Sandra paid $500 toward the note on day 40. On day 90, she paid an additional $500. Using the U.S. Rule, what was the adjusted balance after the second payment?

Answer 1

According to the US Rule, adjusted balance is calculated as:

On the 1st payment:

Adjusted balance = Note initial value + Interest – Payment

On the 2nd payment:

Adjusted balance = Adjusted balance from 1st payment + Interest – Payment

On the 1st payment, her adjusted balance was:

Interest = $5,000 * 0.05 * 40 / 360

Interest =$27.78

Adjusted balance = $5,000 + $27.78 - $500

Adjusted balance = $4,527.78

On the 2nd payment, her adjusted balance was:

Interest = $4,527.78 * 0.05 * (90 – 40) / 360

Interest = $31.44

Adjusted balance = $4,527.78 + $31.44 - $500

Adjusted balance = $4,059.22 (ANSWER)