On March 31, Dower Publishing discounted a $30,000 note at a local bank.

On March 31, Dower Publishing discounted a $30,000 note at a local bank. The note was dated February 28 and required the payment of the principal amount and interest at 6% on May 31. The bank’s discount rate is 8%. How much cash will Dower receive from the bank on March 31?

Solutions

Expert Solution

Determine the cash that D will receive from the bank on March 31:

The amount of cash that D will receive from bank on March 31 is the sum of face value of the note and the interest to maturity as reduced by the discount on note calculated as below:

Particulars	Amount ($)
Face value of the note	30,000
Add: Interest to maturity ($30,000 × 6% × 3/12)	450
Maturity value	30,450
Less: Discount on notes payable ($30,450 × 8% × 2/12)	(406)
Cash proceeds from the bank	30,044

Hence, the amount of cash that D will receive from bank on March 31 is $30,044.

Junaid answered 2 years ago

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