Answered: Billy Thornton borrowed $145,000 at a…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8EB: You put $600 in the bank for 3 years at 15%. A. If Interest Is added at the end of the year, how...

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Question

Billy Thornton borrowed $145,000 at a rate of 7.25%, simple interest, with interest paid at the end of each month. The bank uses a 360-day year. How much interest would Billy have to pay in a 30-day month?

Select the correct answer.

a. $873.44

b. $876.04

c. $881.24

d. $870.84

e. $878.64

Expert Solution

Step 1

Simple interest is the interest calculated on the principal of the loan or the amount originally deposited in the account.

Step 2

The formula for simple interest:

$I n t e r e s t = P r i n c i p a l \times R a t e \times \frac{N u m b e r o f d a y s}{360}$

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