Jim Hindson’s bank granted him a single-payment loan of $3,400 for 144 days at an annual interest rate of 18%. His bank charges ordinary interest. What is the maturity value?
The maturity value of a loan with ordinary interest can be calculated using the formula:
Maturity Value = Principal + (Principal * Rate * Time)
In this case, the principal is $3,400, the rate is 18% (or 0.18 as a decimal), and the time is 144 days (approximately 0.3945 years).
Maturity Value = $3,400 + ($3,400 * 0.18 * 0.3945)
Maturity Value = $3,400 + $227.34
Maturity Value ≈ $3,627.34
Therefore, the maturity value of Jim Hindson's loan is approximately $3,627.34.