Question

Hafers, an electrical supply company, sold $3,400 of equipment to Jim Coates Wiring, Inc. Coates signed a promissory note May 12 with 3.4% interest. The due date was August 10. Short of funds, Hafers contacted Charter One Bank on July 20; the bank agreed to take over the note at a 5.1% discount. (Use Days in a year table.) What proceeds will Hafers receive?

Answer 1

Sale value of equipment $3,400

Interest @ 3.4% for period from May 12 to August 10

Days = 20+30+31+9 = 90 days

Interest formula = Amount * rate * days/365

= 3400*3.4%*90/365

= $28.50

Total amount of promissory note = 3400+28.50

=$ 3428.50

Discount of bills @5.1%

It means Interest @ 5.1% for period July 20 to august 10 shall be deducted from Amount of promissory note

Days = july 12 days + august 9 days = 21 days

Interest = 3428.50 * 5.1%*21/365

= $10.06

So, received Amount = 3428.50 - 10.06

=$ 3418.44

So, Hafwr will receive $3418.44 from bank.