Max Wholesaler borrowed $5000 on a 12%, 120-day note. After 45 days, Max paid $1750 on the note. Thirty days later, Max paid an additional $1500. Use ordinary interest (360 days).
a. Determine the total interest using the U.S. Rule. (Round your intermediate balances and interest amounts to the nearest cent. Round your final answer to the nearest cent.)
Total interest amount $
b. Determine the ending balance due using the U.S. Rule. (Round your intermediate balances and interest amounts to the nearest cent. Round your final answer to the nearest cent.)
Ending balance due: $
2865.51
To determine the total interest and ending balance due on Max Wholesaler's note, we need to calculate the interest for each payment and add them up.
a. First, let's calculate the interest for the first payment of $1750 made after 45 days:
Principal borrowed = $5000
Interest rate (annual) = 12%
Time (in years) = 45/360 = 1/8
Interest for the first payment = Principal * Interest rate * Time
= $5000 * 0.12 * (1/8)
= $750
b. Next, let's calculate the interest for the second payment of $1500 made after a total of 75 days (45 days + 30 days):
Principal remaining = $5000 - $1750 = $3250
Time (in years) = 75/360 = 5/24
Interest for the second payment = Principal remaining * Interest rate * Time
= $3250 * 0.12 * (5/24)
= $270.83 (rounded to the nearest cent)
c. Now, let's calculate the total interest by adding the interest from both payments:
Total interest = interest for the first payment + interest for the second payment
= $750 + $270.83
= $1020.83 (rounded to the nearest cent)
d. Finally, let's calculate the ending balance due by subtracting the total payments ($1750 + $1500 = $3250) made from the initial borrowed amount of $5000 and adding the total interest of $1020.83:
Ending balance due = Principal borrowed - Total payments + Total interest
= $5000 - $3250 + $1020.83
= $2770.83 (rounded to the nearest cent)
Therefore, the answers are:
a. Total interest amount = $1020.83
b. Ending balance due = $2770.83
To solve this problem, we will need to calculate the interest and ending balance due using the U.S. Rule.
Step 1: Calculate the interest for the first payment after 45 days.
First, calculate the interest for 45 days using the formula:
Interest = Principal x Rate x Time.
Principal = $5000
Rate = 12% = 0.12
Time = 45/360 (since we are using the ordinary interest of 360 days)
Interest = $5000 x 0.12 x (45/360) = $75.
So, the interest for the first payment is $75.
Step 2: Calculate the principal remaining after the first payment.
Principal remaining = Principal - Payment
Principal remaining = $5000 - $1750 = $3250.
Step 3: Calculate the interest for the second payment after 75 days.
Again, calculate the interest for 75 days using the formula for ordinary interest.
Interest = Principal remaining x Rate x Time.
Principal remaining = $3250
Rate = 12% = 0.12
Time = 75/360 (since we are using the ordinary interest of 360 days)
Interest = $3250 x 0.12 x (75/360) = $22.92.
So, the interest for the second payment is $22.92.
Step 4: Calculate the principal remaining after the second payment.
Principal remaining = Principal remaining - Payment
Principal remaining = $3250 - $1500 = $1750.
Step 5: Calculate the total interest.
Total interest = Interest for the first payment + Interest for the second payment.
Total interest = $75 + $22.92 = $97.92.
Therefore, the total interest amount using the U.S. Rule is $97.92.
Step 6: Calculate the ending balance due.
Ending balance due = Principal remaining + Total interest.
Ending balance due = $1750 + $97.92 = $1847.92.
Therefore, the ending balance due using the U.S. Rule is $1847.92.