To determine the total payment required to pay off a promissory note, we need to calculate the interest accrued and then add it to the principal amount. Here are the detailed steps:
1. Identify the Principal (P):
The principal is the initial amount of money lent or invested. For this problem, it is \[tex]$400.00.
2. Determine the Interest Rate (R):
The interest rate given is 6%. To use it in our calculation, we need to convert it to a decimal form. Therefore, 6% becomes 0.06.
3. Establish the Term (T) in Years:
The term is given in days, but we need to convert it to years because interest rates are usually annual. Since there are 360 days typically considered in a financial year (ordinary interest), we convert 90 days to years by dividing 90 by 360.
\[
T = \frac{90}{360} = 0.25 \text{ years}
\]
4. Calculate the Interest (I) using the formula:
\[
I = P \times R \times T
\]
Substituting the values, we get:
\[
I = 400 \times 0.06 \times 0.25
\]
By calculating the above expression, we get the interest amount:
\[
I = 6.0 \text{ dollars}
\]
5. Calculate the Total Payment:
The total payment is the sum of the principal and the interest accrued.
\[
\text{Total Payment} = P + I
\]
Substituting the values, we get:
\[
\text{Total Payment} = 400 + 6.0 = 406.0 \text{ dollars}
\]
Thus, the total payment required to pay off the promissory note is:
\[
\$[/tex]406.00
\]
Therefore, the total payment required to pay off the promissory note issued for \[tex]$400.00 at 6% ordinary interest and a 90-day term is \$[/tex]406.00.
