[Anonymous]

Beta Company has arranged to borrow $10,000 for 180 days. Beta will repay the principal amount plus $600 in interest at the maturity of the note.

Which one of the following is the annual percentage rate (APR) of interest that Beta is paying on the loan?

A. 3.0%

B. 6.0%

C. 12.0%

D. 16.6%

C is correct. The calculation of annual percentage rate (APR) is a function of the basic equation: Interest = Principal x Interest Rate x Time period of loan. Rearranged, the interest rate on an annual basis (APR) is:

APR = Interest / (Principal x Time fraction of year)

Using the facts above, the APR is computed as:

APR= 600 / [10,000*(180/360)]

APR = .06 x 360/180 = .06 x 2 = 12%

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Why do you use 360 days when there are 365 days in a year?

[NYCaccountant]

I believe most banks use 360 as a rule. I know when I do amortization schedules at work, I always use 360 and so does everyone else.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[NYCaccountant]

I believe most banks use 360 as a rule. I know when I do amortization schedules at work, I always use 360 and so does everyone else.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[acamp]

Once upon a time, bankers did not have computers and so they adopted the easier 360-day year. Nice easier fractions, all months are 30 days, etc.

Ninja + Wiley Test Bank: [FAR - 81] [REG - 76] [BEC - 88] [AUD - 73](doh!)

Becker Videos: [AUD - 82]

California CPA

[acamp]

Once upon a time, bankers did not have computers and so they adopted the easier 360-day year. Nice easier fractions, all months are 30 days, etc.

Ninja + Wiley Test Bank: [FAR - 81] [REG - 76] [BEC - 88] [AUD - 73](doh!)

Becker Videos: [AUD - 82]

California CPA

[Author]

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