Max Wholesaler borrowed $9,000 on a 11%, 120-day note. After 45 days, Max paid $3,150 on the note. Thirty days later, Max paid an additional $2,700. Use ordinary interest.
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.)
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.)
To determine the total interest and ending balance due using the U.S. Rule, we need to break down the loan repayment process step by step.
Step 1: Calculate the interest earned during the first 45 days.
To find the interest earned during the first 45 days, we can use the formula: Interest = Principal × Rate × Time
Interest = $9,000 × 0.11 × (45/360)
Interest = $123.75
Step 2: Calculate the remaining balance after the first payment.
To find the remaining balance after the first payment, subtract the payment from the principal amount.
Remaining balance = $9,000 - $3,150
Remaining balance = $5,850
Step 3: Calculate the interest earned during the next 30 days.
To find the interest earned during the next 30 days, we can use the same interest formula.
Interest = $5,850 × 0.11 × (30/360)
Interest = $48.75
Step 4: Calculate the remaining balance after the second payment.
To find the remaining balance after the second payment, subtract the payment from the previous remaining balance.
Remaining balance = $5,850 - $2,700
Remaining balance = $3,150
Step 5: Calculate the interest earned on the remaining balance for the remaining days (45 days).
To find the interest earned for the remaining 45 days, apply the interest formula again.
Interest = $3,150 × 0.11 × (45/360)
Interest = $39.38
Step 6: Calculate the total interest.
To find the total interest, sum up the interest earned during each period.
Total interest = Interest from step 1 + Interest from step 3 + Interest from step 5
Total interest = $123.75 + $48.75 + $39.38
Total interest = $211.88
Step 7: Calculate the ending balance due.
To find the ending balance due, add the remaining balance to the total interest.
Ending balance due = Remaining balance after the second payment + Total interest
Ending balance due = $3,150 + $211.88
Ending balance due = $3,361.88
Therefore, the answers are:
a. The total interest using the U.S. Rule is $211.88.
b. The ending balance due using the U.S. Rule is $3,361.88.