Question

April 1, 2020 I promise to pay John B. Stetson $12,000 together with interest at 15%...

April 1, 2020 I promise to pay John B. Stetson $12,000 together with interest at 15% three years from the date. Use 360 days in a year.

How much interest will be accrued on this note on December 31, 2020?

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Answer #1

Solution:

The formula for calculating the accrued Interest on a note payable is

= Note Amount * Annual Interest rate * ( No. of days in a year for which the interest is accrued / 360 )

As per the information given in the question we have

Note Amount = $ 12,000 ; Annual Interest rate = 15 % = 0.15

No. of days in a year for which the interest is accrued = April 1, 2020 to December 31, 2020

= ( 30 + 31 + 30 + 31 + 31 + 30 + 31 + 30 + 31 ) days

= 275 days

Applying the above information in the formula we have

= $ 12,000 * 0.15 * ( 275 / 360 )

= $ 1,800 * ( 275 / 360 )

= $ 1,800 * 0.763889

= $ 1,375

Thus the accrued interest on this note on December 31, 2020 is = $ 1,375

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