Meridian Credit Union Approved a $500 000 Line of Credit

Multiple Choice

Meridian credit union approved a $500 000 line of credit on a demand basis to Hard Steel to finance the import of raw material. Interest at the rate of prime plus 1% is charged to Hard Steel's chequing account at the bank on the 1st of each month. The initial advance was $300 000 on 1st of June, 2016, when the prime rate stood at 3%. There were further advances of $40 000 on July 13 and $100 000 on July 28. Payments of $70 000 each were applied against the principal on August 15 and September 15. What was the total interest paid on the loan for the period June 1 to October 1?

A) $4590.68
B) $1380.82
C) $2807.67
D) $4064.66