Calculate the interest on a 270-day, 11% note for $36,000. (Round your answer to the nearest dollar.)

A) $5,940

B) $2,970

C) $3,960

D) $330

Question

Calculate the interest on a 270-day, 11% note for $36,000. (Round your answer to the nearest dollar.)

A) $5,940

B) $2,970

C) $3,960

D) $330

BlackTom AI · Accepted Answer

We start by identifying the known values and the usual formula for simple interest: Interest = Principal × Rate × Time. Here, the principal is $36,000, the annual interest rate is 11%, and the time is 270 days.

Option 1: $3,960. This value corresponds to applying the annual interest on the full year with no time adjustment, i.e., 36,000 × 0.11 = 3,960. However, since the note runs for 270 days, we must scale the annual interest by the fraction of the year that 270 days represents. Using 365 days would give 3,960 × (270/365) ≈ 2,929, which is not $3,960. So this option overstates interest for a 270-day period.

Option 2: $5,940. This figure results from multiplying 36,000 by 0.11 and then by 1.5 (or by a time period longer than a year), which does not align with a 270-day segment of a year. It incorrectly uses a time factor that is too large for the given period, making it an implausible value for a 270-day note.

Option 3: $2,970. This value aligns with using a 360-day year convention, where Time/Year = 270/360 = 0.75. Calculation: 36,000 × 0.11 × 0.75 = 36,000 × 0.0825 = 2,970. In many accounting problems, a 360-day year is used for simplicity, which yields this amount. This option accurately reflects the 270-day period under that common convention.

Option 4: $330. This is far too small to be the interest on a $36,000 note at 11% for any realistic time frame; it would imply an extremely short or negligible time period or an incorrectly applied rate. It does not match the given principal, rate, or time period.

In summary, the correct method depends on the time basis used. If the problem assumes a 360-day year (Time/Year = 270/360), the interest is 36,000 × 0.11 × (270/360) = 2,970. If instead a 365-day year is used, the result would be approximately 2,929, which is not one of the provided options. The presence of 2,970 among the choices indicates the convention the question intends.

33:010:272:05 INTRO FINANCIAL ACCT Final exam- Requires Respondus LockDown Browser

Calculate the interest on a 270-day, 11% note for $36,000. (Round your answer to the nearest dollar.) A) $5,940 B) $2,970 C) $3,960 D) $330

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