Question

On December 31, 2020 Riverbed Company had the following account balances:

Notes Receivable		$269,500
Interest Receivable		4,125

Detail of the Notes Receivable is as follows:

Note 1 - 6-month 9% note dated 10/31/20		55,000
Note 2 - 2-year non-interest bearing note dated 1/1/20		82,500
Note 3 - 5-month interest bearing note dated 9/30/20		132,000

What is the interest rate on Note 3 (5-month interest bearing note)?

Interest rate on Note 3

Type your answer here %

Answer 1

Total Interest receivable as on December 31,2020	4125
Less:
Interest accrued on Note 1 for the period 10/31/20 -12/31/20 (2 months )	825   {55000*.09*2/12}
Interest accrued on note 2	0     {as note is non interest bearing }
Interest accrued on note 3	3300

Interest accrued on note 3 for the period 9/30/2020 -12/31/2020 (3 months )=Principal * rate *n/12

                       3300 = 132000 *r *3/12

                       3300 = 33000 *r

                       r = 3300/33000

                         = .10 or 10%

Interest rate on Note 3 = 10%