Question

You are the auditor at Cujo Resort. Your boss had asked you to calculate the maturity value of an interest-bearing note of $5,000, which should be repaid in 90 days from now (interest = 5%). A year is considered having 360 days. Based on this information you calculate that the maturity value is equal to:

Answer 1

The maturity value of a $5,000 interest-bearing note due in 90 days with a 5% interest rate is $5,062.50, after considering a 360-day year for interest calculation.

Step-by-step explanation:

Calculating Maturity Value of an Interest-Bearing Note

The question revolves around calculating the maturity value of an interest-bearing note with a principal of $5,000 due in 90 days at an interest rate of 5%. First, we need to calculate the interest earned over the 90-day period. Given a 360-day year, the calculation proceeds as follows:

• Interest = Principal × Rate × Time
• Interest = $5,000 × 5% × (90/360)
• Interest = $5,000 × 0.05 × 0.25
• Interest = $62.50

The maturity value of the note is then the sum of the principal and the interest earned.

• Maturity Value = Principal + Interest
• Maturity Value = $5,000 + $62.50
• Maturity Value = $5,062.50

The maturity value of the note is $5,062.50.