Exam 11: Promissory Notes, Simple Discount Notes, and the Discount Process

On June 30, Rose Company accepted a 90-day, $12,000 non-interest-bearing note from C Manufacturer. The maturity value of the note for Rose is:

Wayne Night signed a $10,000 note at Lynn Bank that charges a 7% discount rate. Use ordinary interest. If the loan is for 150 days, find: A. $9,708.33; A. Proceeds B. 7.2% B. Effective rate charges by the bank (to the nearest tenth percent)

A simple discount note results in a higher interest rate (effective rate) than a simple interest note.

Jill Jones borrowed $18,000 for 180 days from Sovereign Bank. The bank discounts the note at 8%. The effective interest rate to the nearest hundredth percent is:

A $7,000, 4%, 120-day note dated March 20, is discounted on July 15. Assuming a 3% discount rate, the bank discount is:

Alfred Corp. accepted a $12,000 note on July 15, with terms of 14% for 60 days. Alfred discounted the note on July 28, at the Victory Bank at 10%. What proceeds did Alfred receive? Use ordinary interest.

Ralph Corporation accepted a $15,000, 11%, 120-day note dated August 19, from Jay Company in settlement of a past bill. On October 20, Ralph Corporation decided to discount the note at a discount rate of 12%. The proceeds to Ralph Corporation are:

The principal of a promissory note is the face value.

United Missouri Bank discounts a 120-day note for $60,000 at 6.75%. It uses 360 days in a year. What is the bank discount?

Lois Longin buys a $10,000 13-week Treasury bill at 11%. Use ordinary interest. What is her effective rate to nearest hundredth percent?

A Treasury bill must be 13 weeks.

The bank discount of an $18,000 non-interest-bearing, simple discount 8%, 90-day note is:

An interest-bearing note can be discounted before the maturity date.

The rate on a promissory note is always stated as a semiannual rate.

If one discounts a non-interest-bearing note, all the following will be used except: