A merchant issues a promissory note.The note has a term of 90 days and a maturity value of $6122.30.The note is sold after 30 days to a bank that discounts the note at d = 10% simple discount.How much does the bank pay for the note?
A)$6016.63
B)$6018.42
C)$6021.66
D)$6023.29

Question

Quizplus · Accepted Answer

The bank pays the present value of the note, which is the maturity value minus the discount. The discount is calculated as the face value of the note multiplied by the discount rate multiplied by the time to maturity. In this case, the face value of the note is $6122.30, the discount rate is 10%, and the time to maturity is 60 days (90 days - 30 days). Therefore, the discount is $6122.30 * 0.10 * 60/360 = $102.04. The present value of the note is $6122.30 - $102.04 = $6016.63.

A Merchant Issues a Promissory Note