Question

Frankenstein Enterprises received two notes from customers for sales that Frankenstein made in 2021. The notes included:

Answer 1

Answer:

option (B) 7.94%

Explanation:

Given:

Principal for Note A = $128,000

Timer period for note A = 5/31/2021 to 12/31/2021 = 7 months = $\frac{7}{12}$ years

Principal for Note B = $215,000

Timer period for note B = 7/1/2021 to 12/31/2021 = 6 months = $\frac{6}{12}$ years

Interest rate for Note B = 9%

Therefore,

Total interest for Note B = Principal × Interest rate × Time period

= $215,000 × 0.09 × $\frac{6}{12}$

= $9,675

Thus interest on Note A = Total interest - Interest on Note B

= $15,600 - $9,675

= $5,925

Also,

Total interest for Note A = Principal × Interest rate × Time period

$5,925 = $128,000 × Interest rate × $\frac{7}{12}$

Interest rate = 0.07935 ≈ 0.0794

or

= 0.0794 × 100% = 7.94%

Hence,

The answer is option (B) 7.94%