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Promissory Note: Terms & Calculations

Instructions:

Choose an answer and hit 'next'. You will receive your score and answers at the end.

question 1 of 3

What is the role of a promissory note?

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1. In this formula, what does the r stand for?

2. For a promissory note with monthly payments and an annual interest rate of 6 percent, what is the monthly interest rate that you need to use in this formula?

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About This Quiz & Worksheet

This quiz and worksheet give you the chance to calculate monthly and total payments of promissory notes. You will be assessed on your knowledge of the terms involved in writing a loan and your ability to use the monthly payment formula.

Quiz & Worksheet Goals

Students will have to answer the following types of problems:

  • Recall the definition of a promissory note
  • Understand what the letters of the monthly payment formula represent
  • Determine a monthly interest rate based on annual interest rate and monthly payments
  • Calculate the monthly payments of a specific loan
  • Determine the total amount paid on a loan after a number of years

Skills Practiced

The worksheet/quiz combo work to help you use the following skills:

  • Reading comprehension - draw out the most important information from the related lesson on Terms and Calculations for Promissory Notes
  • Problem solving - use acquired knowledge to solve loan practice problems
  • Knowledge application - understand how to use the mathematical formula for monthly loan payments based on given information

Additional Learning

To study more about this concept, check out the lesson about Promissory Notes Terms & Calculations. This lesson addresses the following subjects:

  • Conditions included in a promissory note
  • Evaluating the monthly payment formula
  • How banks benefit from selling promissory notes to other banks
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