What is the interest amount collected on a promissory note with a face value of $900, at an interest rate of 12% due in 90 days?

What is the interest amount collected on a promissory note with a face value of $900, at an interest rate of 12% due in 90 days?

• A. $18
• B. $27
• C. $36
• D. $45

Answer: (B)

To calculate the interest amount on a promissory note, you can use the formula for simple interest, which is: Interest = Principal × Rate × Time In this case: - The principal (or face value) is $900. - The interest rate is 12%, which needs to be expressed as a decimal for calculations, so it becomes 0.12. - The time period is 90 days. Since the interest rate is typically expressed annually, we convert days into years. There are 365 days in a year, so 90 days is equal to 90/365 years. Now, putting the values into the formula: Interest = $900 × 0.12 × (90/365) Calculating the time fraction first: 90/365 is approximately 0.2466. Now, substituting this back into the equation: Interest = $900 × 0.12 × 0.2466 Interest = $900 × 0.029592 (after multiplying 0.12 by 0.2466) Interest = $26.6328 When rounded to the nearest cent, the interest collected is approximately $27. This is why $27 is the correct answer; it accurately reflects

To calculate the interest amount on a promissory note, you can use the formula for simple interest, which is:

Interest = Principal × Rate × Time

In this case:

• The principal (or face value) is $900.

• The interest rate is 12%, which needs to be expressed as a decimal for calculations, so it becomes 0.12.

• The time period is 90 days. Since the interest rate is typically expressed annually, we convert days into years. There are 365 days in a year, so 90 days is equal to 90/365 years.

Now, putting the values into the formula:

Interest = $900 × 0.12 × (90/365)

Calculating the time fraction first:

90/365 is approximately 0.2466.

Now, substituting this back into the equation:

Interest = $900 × 0.12 × 0.2466

Interest = $900 × 0.029592 (after multiplying 0.12 by 0.2466)

Interest = $26.6328

When rounded to the nearest cent, the interest collected is approximately $27.

This is why $27 is the correct answer; it accurately reflects