What is the total interest due at maturity on a \$1,500, 12\% annual interest rate, 120-day note? (Assume a 360-day year and simple interest.)

• A. \$60
• B. \$48
• C. \$72
• D. \$120

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the formula for calculating simple interest, which is: \( I = P \times r \times t \), where \( I \) is the interest, \( P \) is the principal amount, \( r \) is the annual interest rate, and \( t \) is the time period expressed in years.
2. Step 2: Identify the values given in the problem: \( P = 1500 \), \( r = 12\% \) (or 0.12 as a decimal), and \( t \) is 120 days. Since the problem assumes a 360-day year, convert \( t \) into years by dividing 120 by 360.
3. Step 3: Substitute the values into the formula: \( I = 1500 \times 0.12 \times \frac{120}{360} \). Perform the division \( \frac{120}{360} \) to determine the time period in years.
4. Step 4: Multiply the principal \( P \) by the annual interest rate \( r \), and then multiply the result by the time period in years to calculate the total interest due.
5. Step 5: Compare the calculated interest to the provided answer choices (\$60, \$48, \$72, \$120) to determine the correct answer.