Paul and sandy Modi signed a $7,690 note at citizens bank. Citizens charges a 6.4% discount...

Paul and sandy Modi signed a $7,690 note at citizens bank. Citizens charges a 6.4% discount rate. Assume the loan is for 320 days.

a. find the proceeds. (use 360 days a year. round your intermediate calculations and final answer to the nearest cent.)

b. find the effective rate changed by the bank. (use 360 days a year. Do NOT round intermediate calculations. Round your answer to the nearest tenth percent.)

Expert Solution

Answer:

Proceeds
                =   Face value/ Market Value of note (-) Discount
                =    $ 7,690 (-) ( $ 7,690 x 6.4% x 320/360)
                =     $ 7,690 (-) $ 437.48
                =      $ 7,252.52

Proceeds = $ 7,252.52

Total interest = $ 7,690 x 6.4% x 320/360 = $ 437.48

Effective rate of interest
                 = Total interest / Proceeds   x 360/320
                 =   $ 437.48 / $ 7,252.52 x 360/320
                 = 6.79%

Effective rate of interest = 6.79%

ekkarill92 answered 3 years ago

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