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24 May, 18:27

Schmidt Company borrows $10,000 from its bank and signs a 6-month note. Interest, which is due quarterly, is specified in the note as 6%. The Interest rate stated in the loan agreement most likely applies to?

a) a 6-month period

b) an entire year

c) a 3 month period

d) semi-monthly

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Answers (1)
  1. 24 May, 18:49
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    b) an entire year

    Explanation:

    Interest rate that is specified on the loan agreement is annual interest rate applicable to the loan on different frequency of interest payments. 6% is the entire years interest rate. Schmidt Company will pay only $150 (10000 x 6% x 3/12) for one quarter. Schmidt Company has only two payments of 3 months interest for this loan in six month duration of loan.
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