Question

On May 12, Scott Rinse accepted an$10,000, 12%, 90-day note for a time extension of a bill for goods bought by Ron Prentice. on June 12, Scott discounted the note at Able Bank 11%.

(Use Days in a year table)

What proceeds does Scott receive?

Proceeds received $____________

Answer 1

Principal = $ 10,000/.

Rate = 12%

Time = 90 Days

Issued on 12th May (132nd Day)

Discount rate = 11%

Discount date = June 12 (163rd Day)

Interest is = 10000*12%*(90/360)

Interest is = $ 300/.

Maturity value is = 10000+300 = $ 10,300/.

Bank interest = 163-132 = 31 Days

So 59 Days are left in discount period (90-31)

Bank interest is = (10300*11%*(59/360))

Bank interest is = $ 185.69/. Approx.

Proceeds received is = Maturity value - Bank Interest

Proceeds received is = (10300-185.69)

Proceeds received is = $ 10,114.31/. Approx.