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Promissory Note Value Formula:
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A promissory note is a financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date. The value of a promissory note is the sum of its principal amount plus any accrued interest.
The calculator uses the simple formula:
Where:
Explanation: This calculation provides the current value of the promissory note by combining the original principal with any interest that has accumulated to date.
Details: Accurate valuation of promissory notes is essential for financial reporting, tax purposes, and when buying/selling notes on the secondary market. It helps both lenders and borrowers understand the current value of the debt instrument.
Tips: Enter the principal amount in USD and the accrued interest in USD. Both values must be non-negative numbers. The calculator will sum these amounts to determine the current value of the promissory note.
Q1: What's the difference between principal and accrued interest?
A: The principal is the original loan amount, while accrued interest is the additional amount earned on that principal over time.
Q2: Does this calculator account for compound interest?
A: No, this is a simple interest calculator. For compound interest, you would need to calculate the accrued interest separately before using this tool.
Q3: Can I use this for discounted promissory notes?
A: This calculates face value. For discounted notes, you would need additional calculations to determine present value.
Q4: What currency does this calculator use?
A: The calculator uses USD, but the same formula applies to any currency.
Q5: How often should I calculate the value of a promissory note?
A: For active notes, valuation should be done regularly (monthly or quarterly) to track interest accrual and current value.