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.

Question

Quizplus · 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.

On May 7, Ralph Blue Accepted a $5,000 Note from Dick