Question

Michigan Bank lends Detroit Furniture Company $110,000 on December 1. Detroit Furniture Company signs a $110,000, 9%, 4-month note. The total cash paid for interest (only) at maturity of the note is: (Round your final answer to the nearest dollar.)

Answer 1

The answer is $3,300.

Step-by-step explanation:

To calculate interest paid on an amount, the following formula is used:

Simple interest = Principal × Rate × Time

Principal = $110,000

Rate in decimal = 9% = 0.09

Time in years = 4 months = 4/12 years

∴ Simple interest = $110,000 × 0.09 × 4/12 = $3,300.