Question

A six-month note for $19300, with interest at 8%, is issued on April 1, 2018. a)...

A six-month note for $19300, with interest at 8%, is issued on April 1, 2018. a) What is the maturity value of the note? b) Find the present value on June 20, 2018, if money is worth 7.2%.

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Homework Answers

Answer #1

Given,

Note value = $19300

Interest rate = 8% or 0.08

Solution :-

(a)

Maturity value of note = Note value x [1 + (interest rate)(6/12)]

= $19300 x [1 + (0.08)(6/12)]

= $19300 x [1 + 0.04]

= $19300 x 1.04 = $20072

(b)

No. of days (n) = 81 days (from April 1, 2018 to June 20,2018)

Interest rate = 7.2% or 0.072

Present value = Maturity value [1 + (interest rate)(n/365)]

= $20072 [1 + (0.072)(81/365)]

= $20072 [1 + 0.01597808]

= $20072 1.01597808 = $19756.33

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