Max Wholesaler borrowed $2,000 on a 10%, 120-day note. After 45 days, Max paid $700 on the note. Thirty days later, Max paid an additional $630. Use ordinary interest
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Well, Max seems to have some interesting note-paying skills! Let's calculate the remaining balance on his loan using ordinary interest.
First, let's calculate the interest for the first 45 days:
Interest = Principal * Rate * Time
Interest = $2,000 * 10% * (45/365)
Interest = $24.65 (approximately)
Now, subtract the interest from the initial payment of $700:
Principal Payment = $700 - $24.65
Principal Payment = $675.35
After this payment, Max still owes $2,000 - $675.35 = $1324.65
Now, let's calculate the interest for the next 30 days:
Interest = $1324.65 * 10% * (30/365)
Interest = $10.89 (approximately)
Adding the interest to the second payment of $630:
Principal Payment = $630 - $10.89
Principal Payment = $619.11
After this payment, Max still owes $1324.65 - $619.11 = $705.54
So, the remaining balance on Max's loan after the two payments is $705.54. Max better keep clowning around because he still has a bit more to pay off!
To calculate the remaining balance on the note, we need to follow these steps:
Step 1: Calculate the interest for the initial period.
The interest can be calculated using the formula: Interest = Principal x Interest Rate x Time
Therefore, the interest for the initial period of 45 days can be calculated as:
Interest = $2,000 x 0.10 x (45/365)
Step 2: Subtract the payment made after 45 days from the total balance.
Remaining Balance = Total Balance - Payment Made
Total Balance = Principal + Interest
Total Balance = $2,000 + Interest (from Step 1)
Remaining Balance = (Principal + Interest) - Payment Made
Step 3: Calculate the interest for the second period.
The interest for the second period of 30 days can be calculated as:
Interest = Remaining Balance x Interest Rate x Time
Step 4: Subtract the payment made after 75 days from the remaining balance.
Remaining Balance = Remaining Balance - Payment Made
Step 5: Calculate the interest for the remaining period (post 75-day payment) using the remaining balance.
Step 6: Add up the interest for each period to get the total interest paid.
Step 7: Subtract the total interest paid from the initial principal to get the final balance.
Now, let's calculate each step of the process:
Step 1:
Interest = $2,000 x 0.10 x (45/365)
Interest = $24.66 (rounded to the nearest cent)
Step 2:
Total Balance = $2,000 + $24.66
Total Balance = $2,024.66 (rounded to the nearest cent)
Remaining Balance = $2,024.66 - $700
Remaining Balance = $1,324.66 (rounded to the nearest cent)
Step 3:
Interest = $1,324.66 x 0.10 x (30/365)
Interest = $10.84 (rounded to the nearest cent)
Step 4:
Remaining Balance = $1,324.66 - $630
Remaining Balance = $694.66 (rounded to the nearest cent)
Step 5:
Interest = $694.66 x 0.10 x (45/365)
Interest = $8.58 (rounded to the nearest cent)
Step 6:
Total Interest Paid = $24.66 + $10.84 + $8.58
Total Interest Paid = $44.08 (rounded to the nearest cent)
Step 7:
Final Balance = $2,000 - $44.08
Final Balance = $1,955.92 (rounded to the nearest cent)
Therefore, the final balance on the note after all the payments is $1,955.92.