QuestionAugust 13, 2025

Which of the following is the correct maturity value equation for a loan of 1,000 for 30 days at 1.2%

Which of the following is the correct maturity value equation for a loan of 1,000 for 30 days at 1.2%
Which of the following is the correct maturity value equation for a loan of 1,000 for 30
days at 1.2%

Solution
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Answer

M = 1000(1 + 0.012 \times \frac{30}{365}) Explanation 1. Identify the formula for maturity value The maturity value of a loan is calculated using the formula M = P(1 + rt), where P is the principal, r is the rate, and t is the time in years. 2. Convert time to years 30 days is equivalent to \frac{30}{365} years. 3. Apply the formula Substitute P = 1000, r = 0.012, and t = \frac{30}{365} into the formula: M = 1000(1 + 0.012 \times \frac{30}{365})

Explanation

1. Identify the formula for maturity value<br /> The maturity value of a loan is calculated using the formula $M = P(1 + rt)$, where $P$ is the principal, $r$ is the rate, and $t$ is the time in years.<br /><br />2. Convert time to years<br /> 30 days is equivalent to $\frac{30}{365}$ years.<br /><br />3. Apply the formula<br /> Substitute $P = 1000$, $r = 0.012$, and $t = \frac{30}{365}$ into the formula: <br /> $M = 1000(1 + 0.012 \times \frac{30}{365})$
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