Question 1

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)

Accepted Answer

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

Question 2

Abe Corp. discounted a 120-day note with a maturity value of $8,000 dated June 8 at the Village Bank on Sept. 2, at a discount rate of 9%. Use ordinary interest. How much did Abe receive?

Accepted Answer

Days = 120 - (days between Jun 8 and Sep 2)= 120 - 86 = 34; 8,000 × .09 × 34/360 = 68; 8,000 - 68 = $7932.

Question 3

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.

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.

Question 4

Calculate maturity value for the interest-bearing note using ordinary interest:
 $$\begin{array} { | l | l | l | } 
\hline \text { Face Value } & \text { Interest Rate } & \text { Time in Days } \
\hline \$ 42,000 & 13 \% & 79 \
\hline
\end{array}$$

Accepted Answer

The answer of Calculate maturity value for the interest-bearing note...

Question 5

Compute bank discount using (A)ordinary interest, (B)proceeds, and (C)effective interest rate to nearest hundredth. Do not round denominator in your calculation.
 $$\begin{array} { | l | l | l | } 
\hline \text { Face Value } & \text { Discount Rate } & \text { Time in Days } \
\hline \$ 12,000 & 13 \% & 120 \
\hline
\end{array}$$

Accepted Answer

The answer of Compute bank discount using (A)ordinary interest, (B)proceeds,...

Question 6

Molly Lenny bought a $10,000 13-week Treasury bill at 13%. What is her effective rate? Use ordinary interest. Round to nearest hundredth percent.

Accepted Answer

10,000 × .13 × 13/52 = $325; $325/($9,675 × (13/52))= 13.44%.

Question 7

Compute bank discount using (A)ordinary interest, (B)proceeds, and (C)effective interest rate to the nearest hundredth. Do not round denominator in your calculation.
 $$\begin{array} { | c | c | c | } 
\hline \text { Face Value } & \text { Discount Rate } & \text { Time in Days } \
\hline \$ 9,000 & 14 \% & 110 \
\hline
\end{array}$$

Accepted Answer

The answer of Compute bank discount using (A)ordinary interest, (B)proceeds,...

Question 8

On May 12, Joy Co. accepted a $1,000, 60-day, 6% note from Abe Wills, granting a time extension on a past-due account. Joy discounted the note at the bank at 9% on May 28. Use ordinary interest. Calculate Joy's proceeds.

Accepted Answer

1,000 × .06 × 60/360 = $10; MV = 1,000 + 10 = 1,010; Days left = 60 - 16 = 44; Interest = 1,010 × .09 × 44/360 = $11.11; Proceeds = $1,010 - $11.11 = $998.89.

Question 9

Use ordinary interest:
 $\begin{array}{|l|l|l|l|l|l|l|l} 
\hline & \text { Rate of } & & \text { Maturity } & \text { Date Note } & \text { Date Note } & \text { Discount } & \
\text { Principal } & \text { Interest } & \text { Time } & \text { Value } & \text { Made } & \text { Discounted } & \text { Period } & \text { Proceeds } \
\hline \$ 90,000 & 10 \% & 150 \text { days } & \text { A } & \text { May 3 } & \text { June } 12 & \text { B } & \text { C }\
\hline 
\end{array}$
 Note to be discounted at 11%

Accepted Answer

The answer of Use ordinary interest:
 \(\begin{array}{|l|l|l|l|l|l|l|l} 
\hline & \text...

Question 10

Calculate proceeds for the interest-bearing note using ordinary interest:
 $$\begin{array} { | l | l | l | } 
\hline \text { Face Value } & \text { Discount Rate } & \text { Time in Days } \
\hline \$ 36,000 & 14 \% & 92 \
\hline
\end{array}$$

Accepted Answer

The answer of Calculate proceeds for the interest-bearing note using...

Question 11

Alfred Corp. accepted a $12,000 note on July 15, with terms of 14% for 60 days. Alfred discounted the note on July 28, at the Victory Bank at 10%. What proceeds did Alfred receive? Use ordinary interest.

Accepted Answer

12,000 × .14 × 60/360 = $280; MV = 12,000 + 280 = $12,280; Days left = 60 - 13 = 47; Bank interest = 12,280 × .10 × 47/360 = $160.32; Proceeds = $12,280 - $160.32 = $12,119.68

Question 12

Lois Longin buys a $10,000 13-week Treasury bill at 11%. Use ordinary interest. What is her effective rate to nearest hundredth percent?

Accepted Answer

10,000 × .11 × 13/52 = $275; $275/($9,725 × (13/52))= 11.31%.

Question 13

Use ordinary interest:
 $$\begin{array} { | l | l | l | l | l | l | l | l | } 
\hline & \text { Rate of } & & \text { Maturity } & \text { Date Note } & \text { Date Note } & \text { Discount } & \
\text { Principal } & \text { Interest } & \text { Time } & \text { Value } & \text { Made } & \text { Discounted } & \text { Period } & \text { Proceeds } \
\hline \$ 60,000 & 14 \% & 60 \text { days } & \text { A } & \text { July 5 } & \text { July 20 } & \text { B } & \text { C } \
\hline
\end{array}$$ Note to be discounted at 11%

Accepted Answer

The answer of Use ordinary interest:
 \[\begin{array} { | l...

Question 14

Morris Bank discounts a 100-day note for $6,000 at 11%. Find (A)bank discount and (B)proceeds. Use ordinary interest.

Accepted Answer

A. 6,000 × .11 × (100/360)= $183.33; B. $6,000 - $183.33 = $5,816.67.

Question 15

On October 15, Daniel Miller accepted a $5,000, 60-day, 8% note from Bill Boyer granting a time extension on a past-due amount. Daniel discounted the note at Volve Bank at 9% on Oct. 26. Use ordinary interest. Calculate Daniel's proceeds.

Accepted Answer

5,000 × .08 × 60/360 = $66.67; MV = 66.67 + 5,000 = $5,066.67; Days left = 60 - 11 = 49 days; Bank charge = $5,066.67 × .09 × 49/360 = $62.07; Proceeds = $5,066.67 - $62.07 = $5,004.60.

Question 16

Wayne Night signed a $10,000 note at Lynn Bank that charges a 7% discount rate. Use ordinary interest. If the loan is for 150 days, find:
A. Proceeds
B. Effective rate charges by the bank (to the nearest tenth percent)

Accepted Answer

A. 10,000 × .07 × 150/360 = 291.67; 10,000 - 291.67 = $9,708.33; B. Eff Rate = 291.67 / (9,708.33 × 150/360)= 7.2%.

Question 17

On May 1, the Morse Company accepted a 60-day, $15,000 non-interest-bearing note from U Corporation. What is the maturity value of the note?

Accepted Answer

It is $15,000 because this is a non-interest-bearing note.

Question 18

Able Co. accepted a $20,000 note on March 10 with terms of 6%, 60 days. Able Co. discounted the note on March 20, at the Green Bank at 7%. Use ordinary interest. What net proceeds did Able receive?

Accepted Answer

20,000 × .06 × 60/360 = $200; MV = 20,000 + 200 = $20,200; Days left = 60 - 10 = 50 days; Bank charge = $20,200 × .07 × 50/360 = $196.39; Proceeds = $20,200 - $196.39 = $20,003.61.

Question 19

Use ordinary interest:
 $$\begin{array} { | l | l | l | l | l | l | l | l | } 
\hline & \text { Rate of } & & \text { Maturity } & \text { Date Note } & \text { Date Note } & \text { Discount } & \
 \text { Principal } & \text { Interest } & \text { Time } & \text { Value } & \text { Made } & \text { Discounted } & \text { Period } & \text { Proceeds } \
\hline \$ 70,000 & 11 \% & 90 \text { days } & \text { A } & \text { Mar } 10 & \text { April 15 } & \text { B } & \text { C } \
\hline
\end{array}$$ Note to be discounted at 10%

Accepted Answer

The answer of Use ordinary interest:
 \[\begin{array} { | l...

Question 20

Use ordinary interest:
 $$\begin{array} { | l | l | l | l | l | l | l | l | } 
\hline & \text { Rate of } & & \text { Maturity } & \text { Date Note } & \text { Date Note } & \text { Discount } & \
 \text { Principal } & \text { Interest } & \text { Time } & \text { Value } & \text { Made } & \text { Discounted } & \text { Period } & \text { Proceeds } \
\hline \$ 18,000 & 8 \% & 120 \text { days } & \text { A } & \text { June } 9 & \text { Sept } 6 & \text { B } & \text { C } \
\hline
\end{array}$$ Note to be discounted at 10%

Accepted Answer

The answer of Use ordinary interest:
 \[\begin{array} { | l...

Quiz 11: Promissory Notes, Simple Discount Notes, and the Discount Process

Abe Corp. discounted a 120-day note with a maturity value of $8,000 dated June 8 at the Village Bank on Sept. 2, at a discount rate of 9%. Use ordinary interest. How much did Abe receive?

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.

Calculate maturity value for the interest-bearing note using ordinary interest: $\begin{array} { | l | l | l | } \hline \text { Face Value } & \text { Interest Rate } & \text { Time in Days } \\\hline \$ 42,000 & 13 \% & 79 \\\hline\end{array}$

Molly Lenny bought a $10,000 13-week Treasury bill at 13%. What is her effective rate? Use ordinary interest. Round to nearest hundredth percent.

On May 12, Joy Co. accepted a $1,000, 60-day, 6% note from Abe Wills, granting a time extension on a past-due account. Joy discounted the note at the bank at 9% on May 28. Use ordinary interest. Calculate Joy's proceeds.

Calculate proceeds for the interest-bearing note using ordinary interest: $\begin{array} { | l | l | l | } \hline \text { Face Value } & \text { Discount Rate } & \text { Time in Days } \\\hline \$ 36,000 & 14 \% & 92 \\\hline\end{array}$

Alfred Corp. accepted a $12,000 note on July 15, with terms of 14% for 60 days. Alfred discounted the note on July 28, at the Victory Bank at 10%. What proceeds did Alfred receive? Use ordinary interest.

Lois Longin buys a $10,000 13-week Treasury bill at 11%. Use ordinary interest. What is her effective rate to nearest hundredth percent?

Morris Bank discounts a 100-day note for $6,000 at 11%. Find (A)bank discount and (B)proceeds. Use ordinary interest.

On October 15, Daniel Miller accepted a $5,000, 60-day, 8% note from Bill Boyer granting a time extension on a past-due amount. Daniel discounted the note at Volve Bank at 9% on Oct. 26. Use ordinary interest. Calculate Daniel's proceeds.

Wayne Night signed a $10,000 note at Lynn Bank that charges a 7% discount rate. Use ordinary interest. If the loan is for 150 days, find: A. Proceeds B. Effective rate charges by the bank (to the nearest tenth percent)

On May 1, the Morse Company accepted a 60-day, $15,000 non-interest-bearing note from U Corporation. What is the maturity value of the note?

Able Co. accepted a $20,000 note on March 10 with terms of 6%, 60 days. Able Co. discounted the note on March 20, at the Green Bank at 7%. Use ordinary interest. What net proceeds did Able receive?