Bart's Construction, Inc. received a promissory note of $12,500 at 7% simple interest for 14 months from one of its customers. After 4 months, Fairlenders, Inc.discounted the note at a discount rate of 9%. Calculate the proceeds that Bart's will receive from the discounted note. (Round to the nearest cent)
A) $12,462.50
B) $12,506.77
C) $13,520.83
D) $12,303.96

Question

Quizplus · Accepted Answer

The proceeds are calculated by first finding the maturity value of the note, then discounting it. The maturity value is $12,500 + ($12,500 * 0.07 * 14/12) = $13,520.83. The discount is $13,520.83 * 0.09 * 10/12 = $1,014.06. The proceeds are $13,520.83 - $1,014.06 = $12,506.77.