The maturity value of a 120-day note for $12,000 that bears interest at 8 percent a year is
A) $12,000.
B) $11,680.
C) $12,320.
D) $12,960.

Question

Quizplus · Accepted Answer

First we need to calculate the interest accrued in 120 days:

Interest = Principal x Rate x Time
Interest = $12,000 x 0.08 x (120/365)  (assuming a 365-day year)
Interest = $318.08

The maturity value would be the sum of the principal and the interest:

Maturity value = $12,000 + $318.08
Maturity value = $12,318.08

Therefore the closest answer choice is C, $12,320.

The Maturity Value of a 120-Day Note for $12,000 That