To determine the total payment required to pay off a promissory note issued for [tex]$1,100.00 at a 6% ordinary interest rate for a 90-day term, we will break down the calculation into clear steps.
1. Identify the key values:
- Principal amount (P): $[/tex]1100.00
- Annual interest rate (R): 6% or 0.06 (as a decimal)
- Term (T): 90 days
2. Convert the term from days to a fraction of a year:
- Ordinary interest typically considers a year to be 360 days (not the usual 365 days).
- Fraction of the year: [tex]\( \frac{90 \text{ days}}{360 \text{ days/year}} = 0.25 \text{ year} \)[/tex]
3. Calculate the interest using the ordinary interest formula:
- The formula for ordinary interest is:
[tex]\[ \text{Interest} = P \times R \times T \][/tex]
- Substituting in the values:
[tex]\[ \text{Interest} = 1100.00 \times 0.06 \times 0.25 \][/tex]
- Performing the multiplication:
[tex]\[ \text{Interest} = 1100.00 \times 0.015 = 16.5 \][/tex]
4. Calculate the total payment:
- Total payment is the sum of the principal and the interest:
[tex]\[ \text{Total Payment} = \text{Principal} + \text{Interest} \][/tex]
[tex]\[ \text{Total Payment} = 1100.00 + 16.5 = 1116.5 \][/tex]
5. Rounding the total payment:
- Ensure the total payment is rounded to the nearest cent (though in this instance, it is already accurately represented).
Thus, the total amount required to pay off the promissory note, after rounding to the nearest cent, is $1116.50.
