Final answer:
The question asks about calculating the interest for a $685,000 loan with a 6.86% interest rate due in 10 months. Interest is computed using the formula: Interest = Principal × Rate × Time. The principal is $685,000, the rate is 6.86% (0.0686 as a decimal), and the time is approximately 0.8333 years.
Step-by-step explanation:
The question you've asked pertains to the negotiation of a short-term loan by Leven Corporation which amounts to $685,000 and is due in 10 months with an interest rate of 6.86%. To provide you with a clearer understanding, let's go over how the interest for this loan would be calculated and what it means in terms of the total amount that will need to be repaid.
To calculate the interest on the loan, you would use the formula:
Interest = Principal × Rate × Time
Where:
- Principal is the amount of the loan, which is $685,000 in this case.
- Rate is the annual interest rate (as a decimal), so here we would use 0.0686.
- Time is the period of the loan expressed in years. Since the loan is for 10 months, this would be ⅔ or approximately 0.8333 years.
Using these figures, the total interest on the loan over the period would be calculated as follows:
Interest = $685,000 × 0.0686 × 0.8333
This calculation will give you the total amount of interest that needs to be paid on top of the principal of the loan. The final step would be adding this interest to the original loan amount to find the total repayment amount.
Budget carefully and ensure that the corporation can manage the repayment of this loan given the interest due, to avoid financial strain.