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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

I'm not sure what the question is referring to as "table value", but this is solved using simple interest calculation (no compounding). I have left the structure of the solution without solving the entire problem, so that you can learn the fomula, etc.

Beginning Date 5/15/2010

Ending Date 10/13/2010

Days in lending period 148
Days in year 360
Percentage of year in lending period (solve for this)

Interest calculation
  Principal amount 703,000
x Rate, annual (provided in question)
x Percentage of year (from above answer)
Product of above (interest due at maturity) (solve for this) A

Add: Principal amount due at maturity 703,000 B

Total due at maturity (solve for this) A + B

 

Remember: interest due = principal amount X rate (annual) X time (percentage of year that loan is outstanding). Don't forget to add back in the principal amount due at maturity, as well. 

 

Good luck!