Question

Quick Print Press borrowed $20,000 from the Provincial Bank on May 25 at 7.5% and secured the loan by signing a promissory note subject to a variable rate of interest. Quick Print made partial payments of $5000 on July 10 and $8000 on September 15. The rate of interest was increased to 8% effective August 1 and to 8.5% effective October 1. What payment must Quick Print make on October 31 if, under the terms of the loan agreement, any interest accrued as of October 31 is to be paid on October 31?

Answer 1

Quick Print must make a payment of $ 7,476.71 on October 31.

The calculation is as below.

Interest calculation is done assuming 365 days in a year and simple interest.

Date	Loan / Repayment	Loan Balance	Interest Rate	No. of days	Interest
25-May	20,000	20,000	7.50	46	189.04
10-Jul	-5,000	15,000	7.50	22	67.81
01-Aug	-	15,000	8.00	45	147.95
15-Sep	-8,000	7,000	7.50	16	23.01
01-Oct		7,000	8.50	30	48.90
31-Oct
	Loan repayable on 31st October		7,000.00
	Interest repayable on 31st October		476.71
	Total amount repayable on 31st October	7,476.71

Note:

1. The loan repayment is deducted from loan amount.

2. The interest amount is not adjusted in loan amount as interest accrued is payable on October 31.