** For these problems, set the calculator date worksheet to a bankers' year - 360 days. 1. The effective rate of a $25,000 interest-bearing simple discount 10%, 90-day note is: (circle the correct answer) a) 10.62% b) 10% c) 10.40% d) 10.26%
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- Marathon Peanuts converts a $130,000 account payable into a short-term note payable, with an annual interest rate of 6%, and payable in four months. How much interest will Marathon Peanuts owe at the end of four months? A. $2,600 B. $7,800 C. $137,800 D. $132,600A customer takes out a loan of $130,000 on January 1, with a maturity date of 36 months, and an annual interest rate of 11%. If 6 months have passed since note establishment, what would be the recorded interest figure at that time? A. $7,150 B. $65,000 C. $14,300 D. $2,383Gifts Galore Inc. borrowed 1.5 million from National City Bank. The loan was made at a simple annual interest rate of 9% a year for 3 months. A 20% compensating balance requirement raised the effective interest rate. a. The nominal annual rate on the loan was 11.25%. What is the true effective rate? b. What would be the effective cost of the loan if the note required discount interest? c. What would be the nominal annual interest rate on the loan if the bank did not require a compensating balance but required repayment in three equal monthly installments?
- Jain Enterprises honors a short-term note payable. Principal on the note is $425,000, with an annual interest rate of 3.5%, due in 6 months. What journal entry is created when Jain honors the note?Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the yearWhat is the effective interest rate of a simple discount note for $27,500,at an ordinary bank discount rate of 10%, for 30 days? Assume that there are 360 days in a year. Question content area bottom The effective interest rate is ??? (Round to the nearest tenth as needed.)
- The face value of a simple discount note is $17,000. The discount is 4% for 160 days. Calculate the following.a. Amount of interest charged for each note. (Round your answer to the nearest cent.) Amount of interest b. Amount borrower would receive. (Round your answer to the nearest cent.) Amount receive c. Amount payee would receive at maturity. Amount receive at maturity d. Effective rate (Round your answer to the nearest tenth percent.) Effective rate %If you sign a discount note for $7,500 at a bank discount rate of 5% for 3 months, what is the effective interest rate? Round to the nearest tenth percent. Step 1 The effective interest rate is the actual interest rate charged on a discounted note and takes into account the fact that the borrower does not receive the full amount of the principal. It is calculated using the bank discount, the proceeds, and time. The bank discount is calculated as follows where the discount rate is given as a decimal and the time will be a fraction whose numerator is the given amount of time in months and denominator is 12 months. bank discount = face value ✕ discount rate ✕ time The rate was given to be 5%. As a decimal, we have . Calculate the bank discount (in $) for the $7,500 promissory note at a discount of 5% for 3 months. bank discount = face value ✕ discount rate ✕ amount of time in months 12 months = $7,500 ✕ ✕ 3 12 = $The face value of a simple discount note is $4,000. The bank discount is calculated at 12% for 60 days. Use ordinary interest. Calculate:A.Amount of interest charged for noteB.Amount borrower would receiveC.Amount payee would receive at maturityD.Effective rate Note: round to the nearest hundredth of a percent
- If you sign a discount note for $5,500 at a bank discount rate of 9% for 3 months, what is the effective interest rate (as a %)? Round to the nearest tenth percent. %Calculate the bank discount and proceeds for the following simple discount note. Use the ordinary interest method, 360 days, when applicable. Round your answers to the nearest cent. Face Value Discount Rate (%) Term Bank Discount Proceeds $32,000 10.05 6 months $ $Simmons Corporation can borrow from its bank at 21 percent to take a cash discount. The terms of the cash discount are 2.5/14, net 50. Compute the cost of not taking the cash discount. Note: Use a 360-day year. Do not round intermediate calculations. Input your final answer as a percent rounded to 2 decimal places.
