Euromart Tile Company borrowed $40,000 on April 6 for 66 days. The rate was 14% using the ordinary interest rate method. On day 25 of the loan, Euromart made a partial payment of $15,000, and on day 45 of the loan, Euromart made a second partial payment of $10,000. What was the new maturity value of the loan?

User Icon for Explain Bot Explain Bot answered
1 year ago

To calculate the new maturity value of the loan, we first need to determine the interest accumulated up to day 25 and day 45 separately.

Step 1: Calculate the interest up to day 25.
Loan amount: $40,000
Number of days: 25
Interest rate: 14%

Interest accrued for 25 days can be calculated using the formula:
Interest = (Principal * Rate * Time) / (365 or 360)

Interest25 = (40,000 * 0.14 * 25) / 365

Next, we calculate the remaining principal after the first partial payment of $15,000.
Remaining principal = $40,000 - $15,000 = $25,000

Step 2: Calculate the interest up to day 45.
Loan amount: $25,000
Number of days: (45 - 25) = 20 (since we need to calculate the additional interest from day 26 to day 45)
Interest rate: 14%

Interest45 = (25,000 * 0.14 * 20) / 365

Now that we have the interest accrued up to day 25 and day 45, we can calculate the new maturity value.

Step 3: Calculate the total interest.
Total interest = Interest25 + Interest45

Step 4: Calculate the new maturity value.
New maturity value = Loan amount + Total interest - Partial payments

New maturity value = $40,000 + (Total interest) - ($15,000 + $10,000)

Once you have the calculated total interest, you can substitute it into the formula to find the new maturity value.