Question

On May 12, Scott Rinse accepted an $7,000, 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 at 11%. (Use Days
in a year table.)

What proceeds does Scott receive? **(Use 360 days a year. Do
not round intermediate calculations. Round your final answer to the
nearest cent.)**

Answer #1

**Step-1, Maturity
Value**

Maturity Value = Principal amount + Interest for 90 Days

= $7,000 + [$7,000 x 0.12 x (90 Days / 360 Days)]

= $7,000 + [$840 x (90 Days / 360 Days)]

= $7,000 + $210.00

= $7,210.00

**Step-2, Discount on
Note**

Discount Period = 59 Days (From May-12 to June-12)

Discount on Note = Maturity value x Discount rate x (Discount period / 360 Days)

= $7,210.00 x 0.11 x (59 Days / 360 Days)

= $793.10 x (59 Days / 360 Days)

= $129.98

**Step-3, Net Proceeds
from the Note**

Net Proceeds from the Note = Maturity Value – Discount on the Note

= $7,210.00 - $129.98

= $7,080.02

**Therefore, the Scott would receive $7,080.02 from the
Note**

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?
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