Susan Smith obtained a single-payment loan of $14,000 to pay for some home repairs. She agreed to repay the loan in 280 days at an interest rate of 14.55%. Her bank charges ordinary interest. What is the maturity value of her loan?
The maturity value of a loan is the total amount that needs to be repaid, including the principal amount borrowed and any interest accrued.
To calculate the maturity value, we first need to find the interest accrued on the loan. The formula to calculate interest in ordinary interest is:
Interest = Principal * Rate * Time
Principal = $14,000
Rate = 14.55% or 0.1455 (decimal form)
Time = 280 days
Interest = $14,000 * 0.1455 * (280/365)
Interest = $14,000 * 0.1455 * 0.7671
Interest = $1,789.39
Now, we add the interest to the principal to find the maturity value:
Maturity Value = Principal + Interest
Maturity Value = $14,000 + $1,789.39
Maturity Value = $15,789.39
Therefore, the maturity value of Susan Smith's loan is $15,789.39.