Question

On March 10th, the owner of The Granary borrowed $80,000 on a 180-day promissory note at 10.5% interest. Find the maturity value on the note

Answer 1

SOLUTION

Notes are often a key component of how a business finances its operations. In general note are a short-term commercial financing.

Write out the information given

$\begin{gathered} \text{ Principal=\ 80,000} \\ \text{ Rate=10.5 \%}=\frac{10.5}{100}=0.105 \\ \\ \text{Time}=\frac{180}{360}=0.5 \end{gathered}$

The maturity value formula is given by

$\text{maturity value= Principal(1+rate x time)}$

Substitute, tyhe value into the formula, we have

$\text{Maturity value =80000(1+(0.5x0.105))}$

Then

$\begin{gathered} \text{Maturity value=80 000(1+0.0525)} \\ \text{Maturity value=80 000(1.0525)} \end{gathered}$

Hence

$\text{Maturity value=}84\text{ 200}$

Hence

The maturity value on the note will be $84 200

Answer: $84 200