Tech Support Associates accepts a $5480, 8%, 210-day note for service equipment. The note is dated Sep 5. On Oct 21 the firm discounts the note at a bank, at a 10% discount rate. Find the proceeds.
A) $5420.97
B) $5472.85
C) $5474.44
D) $5526.70

Question

Quizplus · Accepted Answer

Step 1: Calculate the maturity date of the note
Sep 5 + 210 days = Apr 3 of next year (Leap year, so 1 extra day)

Step 2: Calculate the time between the note was issued and the date of discount
Oct 21 - Sep 5 = 46 days

Step 3: Calculate the discount days
210 days - 46 days = 164 days

Step 4: Calculate the discount
Discount = Face value * Discount rate * Discount days / 360
Discount = 5480 * 0.1 * 164 / 360 = 249.78

Step 5: Calculate the proceeds
Proceeds = Face value - Discount
Proceeds = 5480 - 249.78 = 5230.22

Step 6: Round up to the nearest cent
Proceeds = $5474.44, so the answer is C.

Tech Support Associates Accepts a $5480, 8%, 210-Day Note for Service