Question

On November 1, Year 1, Noble Co borrowed $80,000 from South Bank and signed a 12% six month note payable, all due at maturity. The interest on this loan is stated separately. How much must Noble pay South Bank on May 1, Year 2, when the note matures?
a. $84,000
b. $89,600
c. $82,400
d. $80,000

Answer 1

Answer: answer is not in the option.

Correst answer -Noble must pay South Bank on May 1, Year 2, when the note matures, $84,800

Explanation:

Interest accrued = Principal(amount borrowed) x rate x time

= $80,000 x 12 x 6/12

= $4,800

Amount to be paid on may 1 st the next year (year 2 )=Amount borrowed + interest accrued

= $80,000 +  $4,800 = $84,800

Noble must pay South Bank on May 1, Year 2, when the note matures the sum of $84,800