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

Use ordinary interest: Rate of Maturity Date Note Date Note Discount Principal Interest Time Value Made Discounted Period Proceeds \ 90,000 10\% 150 days A May 3 June 12 B C Note to be discounted at 11%

Bank discount on a simple discount note is based on the amount a borrower receives and not what he or she pays back.

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. Proceeds B. Effective rate charges by the bank (to the nearest tenth percent)

Abe Corp. discounted a 120-day note with a maturity value of $8,000 dated June 8 at the Village Bank on Sept. 2, at a discount rate of 9%. Use ordinary interest. How much did Abe receive?

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:

Match the following terms with their definitions. -Line of credit

Complete the following for this interest-bearing note that is discounted at 11% (use 360 days). Rate of Maturity Date Note Date Note Discount Principal Interest Time Value Made Discounted Period Proceeds \ 90,000 8\% 50 days A Tune 2 June 28 B C

Match the following terms with their definitions. -Face value

The maturity value of an interest-bearing note is:

Match the following terms with their definitions. -Interest-bearing note

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?

The maturity value of a $20,000, 7%, 75-day interest-bearing note is:

A $25,000, 15%, 80-day note dated November 5, is discounted at National Bank on January 5. The discount period is:

The maturity value of a $28,000, 6%, 60-day interest-bearing note is:

Jay discounts a 100-day note for $25,000 at 13%. The effective rate of interest to the nearest hundredth percent is:

A $15,000, 11%, 120-day note dated Sept. 3, is discounted on Nov. 11. Assuming a bank discount rate of 9%, the proceeds would be:

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

The calculation of the bank discount when discounting an interest-bearing note uses maturity value.

Shelley Ann signed a $20,000 note for 120 days at Concord Bank that charges a 5.5% discount rate. What are Shelley's discount and her proceeds?

Match the following terms with their definitions. -Proceeds