Question 1

On October 15, Daniel Miller accepted a $5,000, 60-day, 8% note from Bill Boyer granting a time extension on a past-due amount. Daniel discounted the note at Volve Bank at 9% on Oct. 26. Use ordinary interest. Calculate Daniel's proceeds.

Accepted Answer

5,000 × .08 × 60/360 = $66.67; MV = 66.67 + 5,000 = $5,066.67; Days left = 60 - 11 = 49 days; Bank charge = $5,066.67 × .09 × 49/360 = $62.07; Proceeds = $5,066.67 - $62.07 = $5,004.60.

Question 2

Mover Co. discounted a $2,000, 60-day note dated June 4 at Gloria Bank on June 20, at a discount rate of 9%. Use ordinary interest. How much did Mover Co. receive?

Accepted Answer

The answer of Mover Co. discounted a $2,000, 60-day note...

Question 3

Alfred Corp. accepted a $12,000 note on July 15, with terms of 14% for 60 days. Alfred discounted the note on July 28, at the Victory Bank at 10%. What proceeds did Alfred receive? Use ordinary interest.

Accepted Answer

12,000 × .14 × 60/360 = $280; MV = 12,000 + 280 = $12,280; Days left = 60 - 13 = 47; Bank interest = 12,280 × .10 × 47/360 = $160.32; Proceeds = $12,280 - $160.32 = $12,119.68

Question 4

Use ordinary interest:
  
A. $61,400;
B. 45 days
C. $60,555.75

Accepted Answer

The answer of Use ordinary interest:
  
A. $61,400;
B. 45...

Question 5

Calculate maturity value for the interest-bearing note using ordinary interest:

Accepted Answer

The answer of Calculate maturity value for the interest-bearing note...

Question 6

Lois Longin buys a $10,000 13-week Treasury bill at 11%. Use ordinary interest. What is her effective rate to nearest hundredth percent?

Accepted Answer

10,000 × .11 × 13/52 = $275; $275/($9,725 × (13/52))= 11.31%.

Question 7

Molly Lenny bought a $10,000 13-week Treasury bill at 13%. What is her effective rate? Use ordinary interest. Round to nearest hundredth percent.

Accepted Answer

10,000 × .13 × 13/52 = $325; $325/($9,675 × (13/52))= 13.44%.

Question 8

On May 7, Ralph Blue accepted a $5,000 note from Dick Shea. Terms of the note were 7% for 180 days. On Aug. 19, Ralph could no longer wait for the money and discounted the note at Tover Bank at a discount rate of 8%. Calculate Ralph's proceeds. Use ordinary interest.

Accepted Answer

MV = 5,000 × .07 × 180/360 = $175; 5,000 + 175 = 5,175; Days left = 180 - 104 = 76; Bank rate = 5,175 × .08 × 76/360 = $87.40; Proceeds = $5,175 - $87.40 = $5,087.60.

Question 9

Abe Corp. discounted a 120-day note with a maturity value of $8,000 dated June 8 at the Village Bank on Sept. 2, at a discount rate of 9%. Use ordinary interest. How much did Abe receive?

Accepted Answer

Days = 120 - (days between Jun 8 and Sep 2)= 120 - 86 = 34; 8,000 × .09 × 34/360 = 68; 8,000 - 68 = $7932.

Question 10

Morris Bank discounts a 100-day note for $6,000 at 11%. Find (A) bank discount and (B) proceeds. Use ordinary interest.
A. $183.33;
B. $5,816.67

Accepted Answer

The answer of Morris Bank discounts a 100-day note for...

Question 11

Able Co. accepted a $20,000 note on March 10 with terms of 6%, 60 days. Able Co. discounted the note on March 20, at the Green Bank at 7%. Use ordinary interest. What net proceeds did Able receive?

Accepted Answer

20,000 × .06 × 60/360 = $200; MV = 20,000 + 200 = $20,200; Days left = 60 - 10 = 50 days; Bank charge = $20,200 × .07 × 50/360 = $196.39; Proceeds = $20,200 - $196.39 = $20,003.61.

Question 12

Calculate maturity value for the interest-bearing note using ordinary interest:

Accepted Answer

The answer of Calculate maturity value for the interest-bearing note...

Question 13

Use ordinary interest:
  
A. $18,480;
B. 31;
C. $18,320.87

Accepted Answer

The answer of Use ordinary interest:
  
A. $18,480;
B. 31;
C....

Question 14

On May 12, Joy Co. accepted a $1,000, 60-day, 6% note from Abe Wills, granting a time extension on a past-due account. Joy discounted the note at the bank at 9% on May 28. Use ordinary interest. Calculate Joy's proceeds.

Accepted Answer

1,000 × .06 × 60/360 = $10; MV = 1,000 + 10 = 1,010; Days left = 60 - 16 = 44; Interest = 1,010 × .09 × 44/360 = $11.11; Proceeds = $1,010 - $11.11 = $998.89.

Question 15

Use ordinary interest:
  
A. $93,750
B. 110 days
C. $90,598.96

Accepted Answer

The answer of Use ordinary interest:
  
A. $93,750
B. 110...

Quiz 11: Promissory Notes, Simple Discount Notes, and the Discount Process

On October 15, Daniel Miller accepted a $5,000, 60-day, 8% note from Bill Boyer granting a time extension on a past-due amount. Daniel discounted the note at Volve Bank at 9% on Oct. 26. Use ordinary interest. Calculate Daniel's proceeds.

Mover Co. discounted a $2,000, 60-day note dated June 4 at Gloria Bank on June 20, at a discount rate of 9%. Use ordinary interest. How much did Mover Co. receive?

Alfred Corp. accepted a $12,000 note on July 15, with terms of 14% for 60 days. Alfred discounted the note on July 28, at the Victory Bank at 10%. What proceeds did Alfred receive? Use ordinary interest.

Use ordinary interest: A. $61,400; B. 45 days C. $60,555.75

Calculate maturity value for the interest-bearing note using ordinary interest:

Lois Longin buys a $10,000 13-week Treasury bill at 11%. Use ordinary interest. What is her effective rate to nearest hundredth percent?

Molly Lenny bought a $10,000 13-week Treasury bill at 13%. What is her effective rate? Use ordinary interest. Round to nearest hundredth percent.

On May 7, Ralph Blue accepted a $5,000 note from Dick Shea. Terms of the note were 7% for 180 days. On Aug. 19, Ralph could no longer wait for the money and discounted the note at Tover Bank at a discount rate of 8%. Calculate Ralph's proceeds. Use ordinary interest.

Abe Corp. discounted a 120-day note with a maturity value of $8,000 dated June 8 at the Village Bank on Sept. 2, at a discount rate of 9%. Use ordinary interest. How much did Abe receive?

Morris Bank discounts a 100-day note for $6,000 at 11%. Find (A) bank discount and (B) proceeds. Use ordinary interest. A. $183.33; B. $5,816.67

Able Co. accepted a $20,000 note on March 10 with terms of 6%, 60 days. Able Co. discounted the note on March 20, at the Green Bank at 7%. Use ordinary interest. What net proceeds did Able receive?

Calculate maturity value for the interest-bearing note using ordinary interest:

Use ordinary interest: A. $18,480; B. 31; C. $18,320.87

On May 12, Joy Co. accepted a $1,000, 60-day, 6% note from Abe Wills, granting a time extension on a past-due account. Joy discounted the note at the bank at 9% on May 28. Use ordinary interest. Calculate Joy's proceeds.

Use ordinary interest: A. $93,750 B. 110 days C. $90,598.96