Question

What is the maturity value of a 600,000 loan for 10 days at 12.2% interest using the exact interest method?

Answer 1

Given:

loan amount = 600 000

time duration = 10 days

interest rate = 12.2%

The maturity value (MV) is calculated using the formula:

`\begin{gathered} MV\text{ = amount loaned + interest} \\ =\text{ P(1 + rt)} \\ \text{Where P is the amount loaned} \\ r\text{ is the rate of interest} \\ \text{and t is the time} \end{gathered}`

Substituting we have;

`MV\text{ = 600000(1 + 0.122}*(10)/(365))`

Since there are 365 days in a year.

Simplifying we have:

`\begin{gathered} MV\text{ = 600000}*1.003342466 \\ =\text{ 602005.4795} \\ \approx\text{ 602005.48} \end{gathered}`

Hence, the maturity value is about 602005.48.