Question 1

A simple discount note results in:

Accepted Answer

A) Lower interest costs than a simple interest note 
B) Same interest costs as a simple interest note 
C) Interest deducted when note is paid back 
D) Interest deducted in advance 
E) None of these 
A) Lower interest costs than a simple interest note 
B) Same interest costs as a simple interest note 
C) Interest deducted when note is paid back 
D) Interest deducted in advance 
E) None of these

Question 2

Calculate the maturity value for this interest-bearing note using ordinary interest:
Face Value = $48,000, Time = 82 days, Rate = 12%

Accepted Answer

$48,000 + $1,312 = $

Question 3

Proceeds of a simple discount note equals amount borrowed minus bank discount.

Accepted Answer

A) True 
 B)False

Question 4

Match the following terms with their definitions.
-Simple discount note

Accepted Answer

A) Number of days bank will wait for its money in the discount process 
B) Cash paid on due date 
C) The principal 
D) Maturity value minus bank discount 
E) A written promise
F)Bank deducts interest in advance
G)Signs the note
H)Rate bank charges in the discounting process
I)True rate of interest
J)Due date
K)Ability to borrow quickly
L)Amount bank charges in the discounting process
M)Maturity value greater than original note 
A) Number of days bank will wait for its money in the discount process 
B) Cash paid on due date 
C) The principal 
D) Maturity value minus bank discount 
E) A written promise
F)Bank deducts interest in advance
G)Signs the note
H)Rate bank charges in the discounting process
I)True rate of interest
J)Due date
K)Ability to borrow quickly
L)Amount bank charges in the discounting process
M)Maturity value greater than original note

Question 5

On October 15, Daniel Miller accepted a $5,000, 60-day, 8% note from Bill Boyer granting a time extension on a past-due amount. Daniel discounted the note at Volve Bank at 9% on Oct. 26. Use ordinary interest. Calculate Daniel's proceeds.

Accepted Answer

5,000 × .08 × 60/360 = $66.67;

Question 6

The maker of a promissory note issues the note.

Accepted Answer

A) True 
 B)False

Question 7

B. Blue discounts a 90-day note for $20,000 at 4%. The bank discount is (assume ordinary interest):

Accepted Answer

A) $20,200 
B) $19,800 
C) $200 
D) $2,000 
E) None of these 
A) $20,200 
B) $19,800 
C) $200 
D) $2,000 
E) None of these

Question 8

Match the following terms with their definitions.
-Effective rate

Accepted Answer

A) Number of days bank will wait for its money in the discount process 
B) Cash paid on due date 
C) The principal 
D) Maturity value minus bank discount 
E) A written promise
F)Bank deducts interest in advance
G)Signs the note
H)Rate bank charges in the discounting process
I)True rate of interest
J)Due date
K)Ability to borrow quickly
L)Amount bank charges in the discounting process
M)Maturity value greater than original note 
A) Number of days bank will wait for its money in the discount process 
B) Cash paid on due date 
C) The principal 
D) Maturity value minus bank discount 
E) A written promise
F)Bank deducts interest in advance
G)Signs the note
H)Rate bank charges in the discounting process
I)True rate of interest
J)Due date
K)Ability to borrow quickly
L)Amount bank charges in the discounting process
M)Maturity value greater than original note

Question 9

On May 7, Ralph Blue accepted a $5,000 note from Dick Shea. Terms of the note were 7% for 180 days. On Aug. 19, Ralph could no longer wait for the money and discounted the note at Tover Bank at a discount rate of 8%. Calculate Ralph's proceeds. Use ordinary interest.

Accepted Answer

MV = 5,000 × .07 × 180/360 = $

Question 10

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

Accepted Answer

A) $1.74 
B) $1.77 
C) $7.11 
D) $17.68 
E) None of these 
A) $1.74 
B) $1.77 
C) $7.11 
D) $17.68 
E) None of these

Question 11

Calculate proceeds for the interest-bearing note using ordinary interest:
 $$\begin{array} { | l | l | l | } 
\hline \text { Face Value } & \text { Discount Rate } & \text { Time in Days } \
\hline \$ 36,000 & 14 \% & 92 \
\hline
\end{array}$$

Accepted Answer

The answer of Calculate proceeds for the interest-bearing note using...

Question 12

An 8% 13-week Treasury bill would have an effective interest rate of what (to the nearest hundredth percent)? Assume it is a $10,000 Treasury bill.

Accepted Answer

A) 8.20% 
B) 8.16% 
C) 8.19% 
D) 9.00% 
E) None of these 
A) 8.20% 
B) 8.16% 
C) 8.19% 
D) 9.00% 
E) None of these

Question 13

Jone Corporation accepted a $25,000, 8%, 120-day note on July 8. Jone discounted the note on September 4, at Rool Bank at 7%. What proceeds did Jone receive? Use ordinary interest.

Accepted Answer

MV = 25,000 × .08 × 120/360 =

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Mark Price, the owner of Biggie's Restaurant, took a simple discount note for two years from PNC Bank for renovations. His loan was for $10,000 at a 6% discount rate. Calculate (A)bank discount, (B)proceeds, (C)effective rate to the nearest tenth.

Accepted Answer

A. 10,000 × .06 × 2

Question 16

The bank discounts an $8,750 simple discount note at 6% for 60 days. What is the discount amount?

Accepted Answer

A) $8.75 
B) $78.50 
C) $86.30 
D) $87.50 
E) None of these 
A) $8.75 
B) $78.50 
C) $86.30 
D) $87.50 
E) None of these

Question 17

A Treasury bill must be 13 weeks.

Accepted Answer

A) True 
 B)False

Question 18

A simple discount note does not involve a bank discount.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Match the following terms with their definitions.
-Promissory note

Accepted Answer

A) Number of days bank will wait for its money in the discount process 
B) Cash paid on due date 
C) The principal 
D) Maturity value minus bank discount 
E) A written promise
F)Bank deducts interest in advance
G)Signs the note
H)Rate bank charges in the discounting process
I)True rate of interest
J)Due date
K)Ability to borrow quickly
L)Amount bank charges in the discounting process
M)Maturity value greater than original note 
A) Number of days bank will wait for its money in the discount process 
B) Cash paid on due date 
C) The principal 
D) Maturity value minus bank discount 
E) A written promise
F)Bank deducts interest in advance
G)Signs the note
H)Rate bank charges in the discounting process
I)True rate of interest
J)Due date
K)Ability to borrow quickly
L)Amount bank charges in the discounting process
M)Maturity value greater than original note

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

A simple discount note results in:

Calculate the maturity value for this interest-bearing note using ordinary interest: Face Value = $48,000, Time = 82 days, Rate = 12%

Proceeds of a simple discount note equals amount borrowed minus bank discount.

Match the following terms with their definitions. -Simple discount note

On October 15, Daniel Miller accepted a $5,000, 60-day, 8% note from Bill Boyer granting a time extension on a past-due amount. Daniel discounted the note at Volve Bank at 9% on Oct. 26. Use ordinary interest. Calculate Daniel's proceeds.

The maker of a promissory note issues the note.

B. Blue discounts a 90-day note for $20,000 at 4%. The bank discount is (assume ordinary interest):

Match the following terms with their definitions. -Effective rate

On May 7, Ralph Blue accepted a $5,000 note from Dick Shea. Terms of the note were 7% for 180 days. On Aug. 19, Ralph could no longer wait for the money and discounted the note at Tover Bank at a discount rate of 8%. Calculate Ralph's proceeds. Use ordinary interest.

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

Calculate proceeds for the interest-bearing note using ordinary interest: Face Value Discount Rate Time in Days \ 36,000 14\% 92

An 8% 13-week Treasury bill would have an effective interest rate of what (to the nearest hundredth percent)? Assume it is a $10,000 Treasury bill.

Jone Corporation accepted a $25,000, 8%, 120-day note on July 8. Jone discounted the note on September 4, at Rool Bank at 7%. What proceeds did Jone receive? Use ordinary interest.

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

Mark Price, the owner of Biggie's Restaurant, took a simple discount note for two years from PNC Bank for renovations. His loan was for $10,000 at a 6% discount rate. Calculate (A)bank discount, (B)proceeds, (C)effective rate to the nearest tenth.

The bank discounts an $8,750 simple discount note at 6% for 60 days. What is the discount amount?

A Treasury bill must be 13 weeks.

A simple discount note does not involve a bank discount.

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

Match the following terms with their definitions. -Promissory note

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