Question: Recording notes receivable stated in months On June 18, James Whiley signed a $10,000.00 note payable with National Bank of Cressville. At his request, the bank drafted the note for a 3-month term, payable on September 18, with 15% interest. Mr. Whiley proudly stated, "Since my company began in 1972, we have never had to borrow money for more than 90 days." The loan officer, believing that Mr. Whiley did not fully understand the terms of the note, explained that the company would be responsible for interest for the number of days between June 18 and September 18. That number, he continued, would be slightly more than 90 days.
Instructions: 1. Use the forms given in the Working Papers. Determine the maturity value of the note on September 18. Use the actual number of days from June 18 in your calculation.
2. Mr. Whiley expected to pay only 90 days of interest on the note. Determine the maturity value of the note assuming interest is charged for only 90 days.
3. Assume the bank allows Mr. Whiley to pay only the interest amount calculated in Instruction 2, even though the money will be borrowed for more than 90 days. Determine the actual interest rate of the note.
4. Should the bank allow Mr. Whiley to pay for only 90 days' interest?