Janet Jones borrowed $3,000 on 90-day 12 percent note. Janet paid $250 toward the note on day 35. On day 80 she paid an additional $400. Using the U.S. Rule, her adjusted balance after her first payment is
To calculate the adjusted balance using the U.S. Rule, we need to understand how this rule works.
The U.S. Rule assumes that interest is only charged on the principal amount for the duration of the note. Any payments made during the note period are applied towards reducing the principal balance, and no interest is credited until the end of the note.
In this case, Janet borrowed $3,000 on a 90-day 12 percent note. Her first payment of $250 was made on day 35. To find the adjusted balance after her first payment, we'll calculate the interest-free principal balance remaining.
Step 1: Find the principal balance after the first payment.
Principal Balance after first payment = Loan Amount - Payment Amount
Principal Balance after first payment = $3,000 - $250 = $2,750
Step 2: Calculate the number of days remaining in the note period after the first payment.
Days Remaining = Total Note Period - Days since the first payment
Days Remaining = 90 - 35 = 55 days
Step 3: Calculate the adjusted balance by dividing the principal balance by the remaining days and multiplying it by the total note period.
Adjusted Balance = Principal Balance after first payment * (Total Note Period / Days Remaining)
Adjusted Balance = $2,750 * (90 / 55)
Calculating this:
Adjusted Balance ≈ $4,500
Therefore, the adjusted balance after Janet's first payment, using the U.S. Rule, is approximately $4,500.