   Chapter 10, Problem 21AT ### 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. 21. $875,000 9 1 2 Oct. 25 87 To determine To calculate: The amount of bank discount, proceeds value and maturity date where face value is$8,75,000, the ordinary discount rate is 912%, date of note is 25 October and time period is 87 days.

Explanation

Given Information:

Face value is $8,75,000, the discount rate is 912%, date of note is 25 October and the time period is 87 days. Formula used: The formula to compute the amount of bank discount is, Bank Discount=Face value×Discount Rate×Time The formula to calculate the amount of proceeds is, Proceeds=Face valueDiscount Steps for determining maturity date 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. Subtract the number of days remaining in the first month from the total duration of the loan. Step3. Keep on subtracting the days from consequent months until the maturity date corresponds to the difference. Calculation: Consider that the face value of the loan is$875,000, the discount rate is 912% and the time period is 87 days.

Simplify the discount rate as

912%=192%=9.5%=9.5100=0.095

Evaluate the time as,

Time=Number of days of a loan360=87360

Substitute \$875,000 for face value, 0.095 for the discount rate and 87360 for time in the formula Bank Discount=Face value×Discount Rate×Time.

Bank Discount=Face value×Discount Rate×Time=8,75,000×0

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