Question

Meghan Brown borrowed $50,000, on a 90-day 10% note. After 55 days, Brown made an initial payment of $9,000. On day 70, Brown made an additional payment of $10,000. Assuming the U.S. Rule, what is the adjusted balance of the first payment? Use 360 days.

Answer 1

Computation of the adjusted balance of the first payment is:

Adjusted balance of first payment = Total amount borrowed - Total payment after 55 days

= $50,000 - $9,550

= $40,450

Hence, the adjusted balance of the first payment is $40,450.

Working Notes:

1.

Computation of the interest paid for 55 days is:

Interest paid for 55 days = Initial payment * Interest rate * 55/90

= $9,000 * 10% * 55/90

= $550

Hence, the interest paid for 55 days is $550.

2.

Computation of the total payment after 55 days is:

Total payment after 55 days = Initial payment + Interest paid for 55 days

= $9,000 + $550

= $9,550

Hence, the total payment after 55 days is $9,550.