Question

Solve for maturity value, discount period, bank discount, and proceeds. Assume a bank discount rate of 9%. Use the ordinary interest method. (Use Days in a year table.) (Do not round intermediate calculations. Round your final answers to the nearest cent.)

	Face value (principal) Rate of interest Length of note Maturity value Date of note Date note discounted Discount period Bank discount Proceeds $50,000 11% 95 days June 10 July 18

Answer 1

Face Value = 50,000

bank discount rate or rate of interest = 9%

Length of note = 95 days

So, interest = 50,000 * 9% * 95/360 = $1,171.23

Maturity Value = 50,000 + 1171.23 = $51,171.23

Discount Period = 95 - (18 + 30 - 10) = 95 - 38 = 57 days

Bank Discount = $51,171.235 * 9% * 57/360 = $729.19

Proceeds = Maturity Value - Bank Discount = $51,171.23 - $729.19 = $50,442