Final answer:
The interest on a $10,000, 5%, 90-day note is calculated using the simple interest formula, resulting in an interest amount of $123.29.
Step-by-step explanation:
Calculating the Interest on a Note
When ABC Company issues a $10,000 note at 5% interest to be paid in 90 days, the interest can be calculated using the simple interest formula:
Interest = Principal × Rate × Time
In this case, the principal is $10,000, the annual interest rate is 5% (or 0.05 when expressed as a decimal), and the time is 90 days out of 365 days in a year (to convert the rate to the appropriate term). Therefore, the interest calculation is as follows:
- Principal (P) = $10,000
- Rate (R) = 5% per year or 0.05
- Time (T) = 90/365 years (since there are 365 days in a year)
Substituting these values into the formula:
Interest = $10,000 × 0.05 × (90/365)
Calculating this gives:
Interest = $123.29
Thus, the interest due on the $10,000, 5%, 90-day note issued by ABC Company is $123.29.