Chapter 10.III, Problem 7RE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

Using ordinary interest, 360 days, calculate the missing information for the following simple discount notes.

Face |
Discount |
Date of |
Term |
Maturity |
Bank |
||||||||

Value |
Rate(%) |
Note |
(days) |
Date |
Discount |
Proceeds |
|||||||

7. $5,000 | 14.7 | April 16 | ___________ | July 9 | _________________ | ____________ |

To determine

**To calculate:** The time duration of the simple discount notes, amount of bank discount and proceeds by using the ordinary interest method 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 left in the month in which loan was 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, that is, May and June.

Calculate the number of days that are left in the last month till the due date.

Total number days in July 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

Now, compute the amount of bank discount,

Simplify the discount rate as,

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