Chapter 10, Problem 20AT

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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

Explanation

**Given Information:**

Face value is

**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,

The formula to calculate amount of proceeds is,

**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:

Determine the number of days for next succeeding months as:

Number of days for next succeeding months, that is, May, June and July are:

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

Total number of days of loan can be computed by adding all the computed days as follows:

Hence, the total number of days of the loan is

Consider that face value of loan is

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