Question

On July 1, a bank loaned $10,000 to a company in the form of a note receivable. The note requires interest at an annual rate of 10%, and all interest is payable (due) at maturity. The amount of interest revenue that the bank should accrue at the end of December is:________.

Answer 1

$500

Step-by-step explanation:

Given that,

Value of note receivable = $10,000

Annual interest rate = 10% (all interest is payable (due) at maturity)

Time period:

The amount of interest accrued will be from July 1st to December 31st. Hence, the interest is calculated for the 6 months.

Therefore, the amount of interest revenue that the bank should accrue at the end of December is as follows:

= Principal value of note × Interest rate × Time period

= $10,000 × 10% × (6/12)

= $10,000 × 0.1 × 0.5

= $500