A Term Deposit of $7 200 was taken out on 1 July 2018. Interest is earned at 5% per annum. Interest is payable on 30 September and 30 March each year. What amount of Interest Revenue would be accrued on 30 June 2019?

Question

BlackTom AI · Accepted Answer

We start by restating the essential details: a term deposit of $7,200 earns interest at 5% per year, with interest paid semi-annually on 30 September and 30 March. We need the Interest Revenue accrued as of 30 June 2019.

Option a: $120. To see if this is correct, compute the interest for the period between the last payment date before 30 June 2019 and 30 June 2019. The last payment before 30 June 2019 was on 30 March 2019. The interval from 30 March 2019 to 30 June 2019 is 3 months. Interest for 3 months is (3/12) × 5% × $7,200 = 0.25 × 360 = $90. Therefore, $120 is too high.

Option b: $30. This would correspond to 1 month of interest (since 1/12 × 5% × 7200 = 30). However, 30 June is 3 months after 30 March 2019, not 1 month, so this underestimates the accrued amount.

Option c: $90. This matches the 3-month accrual from 30 March 2019 to 30 June 2019 at 5% per annum on $7,200: (3/12) × 0.05 × 7,200 = 0.25 × 360 = 90. It also aligns with the semi-annual payment schedule, where interest earned but not yet paid between 30 March and 30 June is recognized as accrued revenue.

Option d: $360. This is the annual interest on $7,200 (0.05 × 7,200 = 360). However, the question asks for the amount accrued up to 30 June 2019, which covers only 3 months since the last payment, not a full year. Therefore, $360 overstates the accrued amount.

In summary, the correct computation focuses on the 3-month period from 30 March 2019 to 30 June 2019 at 5% per year on $7,200, giving $90. The other options misinterpret the time window or the rate application, leading to over- or under-estimation.

A Term Deposit of $7 200 was taken out on 1 July 2018. Interest is earned at 5% per annum. Interest is payable on 30 September and 30 March each year. What amount of Interest Revenue would be accrued on 30 June 2019?Single choice

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