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U.S. Rule for Multiple Payments on Promissory Notes

10 Questions

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U.S. Rule for Multiple Payments on Promissory Notes

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Questions and Answers

What is the first step to calculate the adjusted balance after the first payment?

Calculate the adjusted balance after the second payment

Calculate the principal reduction amount that can be used to reduce the balance

Calculate the interest on the loan amount from the date the promissory note was signed to the date of the first payment (correct)

Calculate the interest on the loan amount from the date of the second payment

What does the U.S. Rule state about partial payments on a promissory note?

Partial payments are only allowed after the maturity date

Partial payments are not allowed

Partial payments are applied to principal first, then reduce the loan balance

Partial payments are applied to interest first, then reduce the loan balance (correct)

What is used to calculate the interest on the loan amount from the date the promissory note was signed to the date of the first payment?

Simple subtraction

Simple division

Simple interest formula (correct)

Simple multiplication

What is the principal reduction amount for the first payment?

$19,800 - $693 Signup and view all the answers

What is the formula to calculate the interest from the first payment to the second payment?

Interest = Principal * Rate * Time Signup and view all the answers

What is the adjusted balance after the first payment?

$60,093 Signup and view all the answers

How is the principal reduction amount of the second payment calculated?

Principal reduction amount = Payment - Interest Signup and view all the answers

What is used as the time factor when calculating the interest from the first payment to the second payment?

45 days Signup and view all the answers

How is the balance at maturity calculated?

Balance at maturity = Principal + Interest Signup and view all the answers

What is the interest on the adjusted balance after the second payment until maturity?

$393.89 Signup and view all the answers