What Is the Maximum That You Would Be Willing to Loan

question 94

Multiple Choice

What is the maximum that you would be willing to loan your brother for a $100 IOU if he promises to pay you back at the end of the year? You want to earn an annual rate of return of 12%.

• A)$82.00
• B)$89.29
• C)$92.73
• D)$88.00

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Definitions:

Note Paid

Represents the full repayment or settlement of the amount owed as denoted in a promissory note.

Interest Accrued

Interest that has been earned but not yet received or recorded.

Calculate Interest

Determining the cost of borrowing money or the profit from lending money, based on the principal sum, rate, and time.

Adjustment

An accounting entry made into a journal that is used to record changes in account balances.