Business Degree Certification Practice Test

What is the maturity value of a $600,000 note payable at 12 percent interest due in 90 days?

1. $72,000

2. $600,000

3. $618,000

4. $672,000

The correct answer is: $618,000

To determine the maturity value of the note payable, you need to calculate the interest that will accrue over the 90-day period and then add that interest to the principal amount of the note. First, convert the interest rate from an annual rate to the rate for the 90-day period. The annual interest rate is 12 percent, so for 90 days, which is one-fourth of a year, the calculation for the interest is as follows: 1. Calculate the interest for 90 days: \[ \text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time} \] Here: - Principal = $600,000 - Rate = 12% per year, which can be expressed as 0.12 - Time = 90 days, which is \(\frac{90}{365}\) years (approximately). Plugging in the values: \[ \text{Interest} = 600,000 \times 0.12 \times \frac{90}{365} \] 2. Simplifying further: \[ \text{Interest} = 600,000 \times