On October 1, 2015, Android Inc. made a loan to one of its customers. The customer signed a 4-month note for $100,000 at 15%. Calculate the maturity value of the note.
A)$105,000
B)$75,000
C)$25,000
D)$95,000

Question

Quizplus · Accepted Answer

The maturity value of the note can be calculated using the simple interest formula:
Interest = Principal x Rate x Time
Time = 4/12 year (since the note is for 4 months)
Interest = $100,000 x 15% x 4/12 = $5,000
Maturity value = Principal + Interest = $100,000 + $5,000 = $105,000. Therefore, the correct answer is (A).