Question

A promissory note for $3600.00 dated May 15, 2012, requires an interest payment of $370.00 at maturity. If interest is at 9.6% compounded monthly, determine the due date of the note. (hint: find n then convert it into days and use excel sheet to add it to issue date)
In the box below show these parameters:

PV=....., FV=.....

Answer 1

The due date of the promissory note is May 24th 2013.

Data;

• Present Value (PV) = $3600
• Interest = $370
• Future Value (FV) = PV + I = $3600 + $370 = $3970

Due Date of the Note

To calculate the due date of the note, we can use the formula of future value of the note.

$FV = PV (1 + \frac{r}{n})^d\\ 3970 = 3600 (1 + \frac{9.6}{12})^d\\3970 = 3600(1+0.008)^d\\\frac{3970}{3600} =(1.008)^n$

Let's take the natural log of both sides

$(1.008)^n = (\frac{3970}{3600})\\ n\ln(1.008) = \ln(\frac{397}{360})\\ n = 12.28$

This is approximately 12 months and 9 days.

The due date of the promissory note is May 24th 2013.

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