The face value of a simple discount note is $4,000. The bank discount is calculated at 12% for 60 days. Use ordinary interest. Calculate:
A. Amount of interest charged for note
B. Amount borrower would receive
C. Amount payee would receive at maturity
D. Effective rate (round to the nearest hundredth of a percent)

Question

Quizplus · Accepted Answer

A. 4000 × .12 × 60/360 = $80; B. 4000 - 80 = $3,920; C. $4,000; D: 80 / (3920 × 60/360)= 12.24%.

The Face Value of a Simple Discount Note Is $4,000