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Monty Company borrowed $1,012,250 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 9%, 5-year, $2,458,400 note payable and an 10%, 4-year, $3,504,400 note payable. Compute the weighted-average interest rate used for interest capitalization purposes

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sahir9397

Answer:

                                          Amount                       Interest

9%, 5-year note payable              2458400                         221256  

10%, 4-year note payable               3504400                         350440  

Total                                      5962800                          571696

Weighted-average interest rate =   571696/5962800= 9.59%

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