FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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A loan of 15700 was charged a simple discount rate of 4.2%. If the proceeds received were 15463.72, find the amount of bank discount. Hence, find the discount period in days.
Transcribed Image Text:365 days – Non leap year
366 days - Leap year
D = Sdt
HOW TO DETERMINE LEAP YEAR?
Where: D- Bank discount
Example:
2016 + 4 = 504 (leap year) – no remainder
2019 + 4 = 504.75 (non-leap year) – with remainder
S- Amount of maturity value
d- Discount rate
t- Term of discount in years
Proceeds = Maturity Value - Bank Discount
Proceeds = S - D
Maturity Value = Face Value + Interest
S = P +1
S = P + Prt
S= P(1 + rt)
Proceeds = S- Sdt
Proceeds = S(1- dt)
Discount Rate Equivalent to
Simple Interest Rate
Simple Interest Rate
Equivalent to Discount Rate
d :
1+ rt
d
r =
1- dt
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