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maturity value/ please help

May. 15, 2010, Leven Corp. negotiated a short-term loan of $703,000. The loan is due Oct. 13, 2010, and carries a 7.04% interest rate. Use ordinary interest to calculate the interest.

What is the total amount Leven would pay on the maturity date?(Use table value.) (Use 360 days a year. Do not round intermediate calculations. Round your answer to two decimal places. Omit the "$" sign in your response.)

Maturity value $

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1 Answer

From 5/15/2010 to 10/13/2010
Days you were lent the money(lending period) count the days 148(5, 30 day months minus 2 days)
360 days a year

percent of the year you owe the loan, fraction of (days you owe)/(days a year)

Rationale for this percentage of the year:
interest =%*year, you need %*percent of the year you are loaned the money because you don’t owe them for a whole year.

Interest you end up paying

Principal(amount you are loaned)*interest Rate(.0704)*%of year(fraction of days)

Plug-in everything in and you get the total interest you should pay but, you also have to pay back the loan so you add the principal to the interest to get the total amount.

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