Practical Business Math Procedures
Practical Business Math Procedures
12th Edition
ISBN: 9781259540554
Author: Jeffrey Slater, Sharon Wittry
Publisher: McGraw-Hill Education
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Chapter 11, Problem 1ECP

(a)

To determine

The bank’s discount of simple discount note of $ 4,250, 190 days at 212% discount rate. Using ordinary interest method.

(a)

Expert Solution
Check Mark

Answer to Problem 1ECP

The Bank’s discount is $56.07_.

Explanation of Solution

Formula used:

Maturity value=Face value(principal)+InterestBank discount=Maturity value×Bank discount rate×Time

Calculation:

Given that, Facevalue=$4,250.

Now, substitute Facevalue=$4,250 in first equation.

Maturity value=Face value(principal)+Interest

For non-interest-bearing promissory note, the equation becomes,

Maturity value=Face value=$4,250

Hence, the maturity value is $4,250.

Substitute, Maturity value=$4,250, Bank discount rate=212%, and Time=190 days in second equation.

Bank discount=Maturity value×Bank discount rate×Time=4,250×2.5100×190360=4,250×0.025×0.5278=56.07

Hence, the Bank’s discount is $56.07_.

(b)

To determine

The proceeds of simple discount note of $ 4,250, 190 days at 212% discount rate. Using ordinary interest method.

(b)

Expert Solution
Check Mark

Answer to Problem 1ECP

The proceeds is $4,193.93_.

Explanation of Solution

Formula used:

Proceeds=Maturity valueBank discount

Calculation:

From part (a) the Maturity value is $4,250 and Bank discount is $56.07.

Substitute Maturityvalue=$4,250,Bank discount=$56.07 in the above mentioned formula.

Proceeds=Maturity valueBank discount=4,25056.07=4,193.93

Hence, the Proceeds is $4,193.93_.

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Chapter 11 Solutions

Practical Business Math Procedures

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