Question

In: Finance

aa 9 year promissionary note of $1100 with interest of 3.8 % compounded quaterly was discounted...

aa 9 year promissionary note of $1100 with interest of 3.8 % compounded quaterly was discounted at 6 % compounded semi annually hielding proceeds of $7600. how many mnths befoe the due date was the discounting rate

Expert Solution

Where FV = Future value

PV = Present value = $1100

r= rate of interest per year = 3.8% = 0.038

n = number of compounding per year

t = number of years

r/n = rate of interest per compounding period

n*t = total number of compounding period

Hence Future value of $11000 promissiory note =

=>Future value of $11000 promissiory note =$15460.39

Lets assume that the Note is discounted X number of semiannual period Before.

Hence n*t = X

As we know

=>

hence the numver of semiannul period = X = 24.024404

One semiannual period = 6 months

hence Total number of month = 6*24.024404 = 144 months

hence the note is discounted 144 months before due date.

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jeff jeffy answered 2 years ago

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