Question

What is the interest due at maturity for a $20,000, 8%, 9-month note payable?

A : $1,800
B : $1,600
C : $1,200
D : $1,700

Answer 1

The interest due at maturity for a $20,000, 8%, 9-month note payable is $1,200. This is calculated by converting the time period to a fraction of a year and applying the interest formula.

Step-by-step explanation:

The question asks us to calculate the interest due at maturity for a $20,000, 8%, 9-month note payable. To find the interest, we use the formula Interest = Principal × Rate × Time. Given the principal ($20,000), the annual interest rate (8%), and the time (9 months), we first convert the time to a fraction of a year, since 8% is an annual rate and there are 12 months in a year (9/12 = 0.75 years).

Now, we can calculate the interest: Interest = $20,000 × 8% × 0.75 = $20,000 × 0.08 × 0.75 = $1,200.

The interest due at maturity for the note payable is $1,200, which corresponds to option C.