You sign a simple discount promissory note for $7,000 at a discount rate of 5%, for 30 months. What are the proceeds?
A) $6,125
B) $7,875
C) $875
D) $3,500

Question

Quizplus · Accepted Answer

The proceeds from a simple discount promissory note are calculated by subtracting the discount from the face value of the note. The discount is found by multiplying the face value ($7,000) by the discount rate (5%) and the time period (30 months or 2.5 years). Discount = $7,000 * 5% * 2.5 = $875. Proceeds = Face Value - Discount = $7,000 - $875 = $6,125.

You Sign a Simple Discount Promissory Note for $7,000 at a Discount