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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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A business borrows $1,000, signing a note that requires repayment of the amount borrowed in two payments of $600 each, one at the end of each of the next two 6-month periods. Calculate the total interest on the note. What is the principal amount of the note?

To determine

Principal amount:

The amount of principal is the amount of money which is lent to the borrower.

Interest amount:

The amount of interest is the amount which is recovered on the money lent to the borrower at a specified rate.

To calculate:

The total interest and principal amount.

Explanation

Given:

Borrowed amount by business=$1,000Installment payment=$600 each at the end of each of next two 6month periods

Here, as per the above given information, the principal amount is:

Principal amount=$1,000

Now, the amount of interest is to be calculated as:

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