Question

Reeves Incorporated is issuing a note payable to four individuals for $5,000 each. Which individual will end up paying the MOST in interest, assuming all individuals pay in full on the maturity date?

A :

Individual 4 has an annual interest rate of 3.8% and a maturity date of six months.

B :

Individual 1 has an annual interest rate of 3.5% and a maturity date of 60 days.

C :

Individual 2 has an annual interest rate of 4.75% and a maturity date of three months.

D :

Individual 3 has an annual interest rate of 4.05% and a maturity date of one year.

Answer 1

We need to compute the interest component for each of the individual .
Formual for computing interest = Amount *annual interest rate * number of days / 360
	i	ii	iii	iv=i*ii*iii/360
	Amt	Rate	Number of days (using 360 days in a year	Interest
A	5000	3.80%	180	95.00
B	5000	3.50%	60	29.17
C	5000	4.75%	90	59.38
D	5000	4.05%	360	202.50
Since most interest is paid is 202.50 correct answer is option D