Question

Monty Company borrowed $1,012,250 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 5-year, $2,458,400 note payable and an 10%, 4-year, $3,504,400 note payable. Compute the weighted-average interest rate used for interest capitalization purposes

Answer 1

Amount Interest

9%, 5-year note payable 2458400 221256

10%, 4-year note payable 3504400 350440

Total 5962800 571696

Weighted-average interest rate = 571696/5962800= 9.59%