Question: A construction contractor borrows $ 5 0 , 0 0 0 to take advantage of a 2 % cash discount offered on material required for

A construction contractor borrows $50,000 to take advantage of a 2% cash discount offered on material required for the project. The note is a single note payable in 60 days at an 11% annual interest rate (assumed 365 days). However, the contractor receives construction progress payments and applies part of the note as follows:
A. $20,000 paid on the note 15 days after the note is made.
B. $20,000 paid 30 days from the date of the original note.
C. $10,000 balance paid on the maturity date of 60 days.
Assumption: With simple interest, single payment notes, any amount paid on the principal stops the interest paid on that amount as of the date payment is made.
Find the total amount of interest paid, how much money the contractor saved by making partial payments on the note, and the percent saved.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!