In: Accounting
The total amount of interest that will be paid on a four-month, $6,500, 9% note payable equals:
Multiple Choice
$585.
$292.
$146.
$195.
* All working forms part of the answer
* Note is of 4 months, hence 4 month interest will be paid.
* Working
A | Amount of Note | $ 6,500.00 |
B | Interest rate [annual] | 9% |
C = A x B | Annual [12 months] interest | $ 585.00 |
D = C x (4 months/12months) | 4 months Interest | $ 195.00 [585 x (4/12)] |
* Hence, the correct answer is Option 4th (Last Option): $ 195