Bob signs a note promising to pay Marie $4000 in 8 years at 8%compounded monthly....

Bob signs a note promising to pay Marie $4000 in 8 years at 8% compounded monthly. Then, 148 days before the note is due, Marie sells the note to a bank which discounts the note based on a bank discount rate of 14%. How much did the bank pay Marie for the note?

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Expert Solution

Calculation of Maturity Value
Present Value of Bond (PV)	$ 4,000.00
Interest rate(Rate)	8%
Interest rate(Rate)PM	0.67%
Period in Month	96
Maturity Value (FV)	$7,569.83

Calculation of bank pay Marie for the note
Maturity Value (FV)	$7,569.83
Discount Rate	14%
Discount Rate for 148	5.68%
Amount paid by the bank	$ 7,163.19

jeff jeffy answered 2 years ago

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