When calculating interest on a promissory note with the maturity date stated in terms of days the
A) maker pays more interest if 365 days are used instead of 360.
B) maker pays the same interest regardless if 365 or 360 days are used.
C) payee receives more interest if 360 days are used instead of 365.
D) payee receives less interest if 360 days are used instead of 365.

Question

Quizplus · Accepted Answer

When using 360 days, each month is divided into 30 days. When using 365 days, each month is divided into its actual number of days. Therefore, using 360 days results in a slightly higher effective interest rate and thus the payee receives more interest.

When Calculating Interest on a Promissory Note with the Maturity