Wombat Company draws a 90- day promissory note for $115,000 with an interest rate of 6% p.a.How much will Wombat receive for this note?

Question

Quizplus · Accepted Answer

To calculate the amount Wombat will receive for the note, we need to use the simple discount formula:
Discount = Face value x Interest rate x Time
Time = 90/360 = 0.25 (since there are 360 days in a year)
Discount = $115,000 x 0.06 x 0.25 = $1,677.50
Amount received = Face value - Discount = $115,000 - $1,677.50 = $113,323. Therefore, the best choice is A.

Wombat Company Draws a 90- Day Promissory Note for $115,000