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A 100-day note worth $38,000 has an interest rate of 10% compounded annually and was signed on September...

5. A 100-day note worth $38,000 has an interest rate of 10% compounded annually and was signed on September 19. A payment totaling $14,500 was made on October 21. What is the new amount that is due upon maturity of the note? Use the banker's method which uses a 360-day year.
- $14,162.22
- $23,837.78
- $37,211.96
- $24,288.05

Answer

Solution:

  1. Calculate the interest for the 100-day period using the banker's method (360-day year):

Interest = Principal × Rate × Time = $38,000 × 0.10 × (100/360) = $1,055.56

  1. Add the interest to the principal to find the total amount before the payment:

Total before payment = $38,000 + $1,055.56 = $39,055.56

  1. Subtract the payment made on October 21:

New amount due = $39,055.56 - $14,500 = $24,555.56

The closest option to this calculated amount is $24,288.05.

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