A 180-day note for $10,000 at 11.5% interest dated May 20 isdiscounted on August 28...

A 180-day note for $10,000 at 11.5% interest dated May 20 is discounted on August 28 at a bank that charges a discount rate of 9.5%. Find the proceeds.

Expert Solution

Face Value of 180-day note = $10,000

No of days after note discounted from issue date = 100 days

No of days for note to maturity = (180 - 100) = 80 days

Calculating the Proceeds of the Note using discount rate of 9.5%:-

Price = Face Value/[1+(Discount rate*No of days/365 days)]

Price = $10,000/[(1+(0.095*80/360)]

Price = $10,000/[(1+0.021111)]

Price = $9793.25

So, the proceed is $9793.25

jeff jeffy answered 2 years ago

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