   Chapter 10, Problem 20AT ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

Chapter
Section ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# Using ordinary interest, calculate the missing information for the following simple discount notes. 20. $50,000 13 Apr. 5 Aug. 14 To determine To calculate: The time duration of the promissory notes, amount of bank discount and proceeds value where face value is$50,000, ordinary discount rate is 13%, date of note is 5 April and maturity date is 14 August.

Explanation

Given Information:

Face value is $50,000, discount rate is 13%, date of note is 5 April and maturity date is 14 August. Formula used: Steps for determining number of days of a loan are: Step1. Calculate the number of days that are left in the month loan is taken by subtracting the loan date from the number of days in the month. Step2. Determine the number of days for next succeeding months. Step3. Calculate the number of days that are left in the last month till the due date. Step4. Add all the days calculated. The formula to compute the amount of bank discount is, Bank Discount=Face value×Discount Rate×Time The formula to calculate amount of proceeds is, Proceeds=Face valueDiscount Calculation: Calculate the number of days that are left in the month when the loan was taken by subtracting the loan date from the number of days in the month as: Number of days left=Total days in that monthLoan Date=305=25 Determine the number of days for next succeeding months as: Number of days for next succeeding months, that is, May, June and July are: Number of days for next succeeding months=31+30+31=92 Calculate the number of days that are left in the last month till the due date: Total number days in August till due date are 14. Total number of days of loan can be computed by adding all the computed days as follows: Total number of days of loan=25+92+14=131 Hence, the total number of days of the loan is 131. Consider that face value of loan is$50,000, discount rate is 13% and time period is 131 days

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