Question 1

Justin discounts a 115-day note for $26,000 at 8.5%. The effective rate of interest to the nearest tenth percent is:

Accepted Answer

A) 0.8% 
B) 0.87% 
C) 8.5% 
D) 8.7% 
E) None of these 
A) 0.8% 
B) 0.87% 
C) 8.5% 
D) 8.7% 
E) None of these

Question 2

Shelley Corporation discounted a $7,000, 90-day note dated June 18, at the Sunshine Bank on July 18 at a discount rate of 12%. (Assume the $7,000 is the maturity value.)The amount of bank discount is:

Accepted Answer

A) $70 
B) $210 
C) $140 
D) $240 
E) None of these 
A) $70 
B) $210 
C) $140 
D) $240 
E) None of these

Question 3

Calculate maturity value for the interest-bearing note using ordinary interest:
 $$\begin{array} { | l | l | l | } 
\hline \text { Face Value } & \text { Interest Rate } & \text { Time in Days } \
\hline \$ 42,000 & 13 \% & 79 \
\hline
\end{array}$$

Accepted Answer

The answer of Calculate maturity value for the interest-bearing note...

Question 4

On July 18, Aui Lester accepted a $15,000, 7%, 180-day note from Ryan O'Flynn. On October 5, Aui discounted the note at Brome Bank at 8%. What proceeds did Aui receive? Use ordinary interest.
 $3 / 4$ $1 / 4$

Accepted Answer

The answer of On July 18, Aui Lester accepted a...

Question 5

Match the following terms with their definitions.
-Bank discount 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 6

Match the following terms with their definitions.
-Maker

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 7

The maker of a promissory note:

Accepted Answer

A) Issues the note 
B) Never borrows the money 
C) Extends the credit 
D) Issues the note and extends credit 
E) None of these 
A) Issues the note 
B) Never borrows the money 
C) Extends the credit 
D) Issues the note and extends credit 
E) None of these

Question 8

The principal of a promissory note is the face value.

Accepted Answer

A) True 
 B)False

Question 9

Able Co. accepted a $20,000 note on March 10 with terms of 6%, 60 days. Able Co. discounted the note on March 20, at the Green Bank at 7%. Use ordinary interest. What net proceeds did Able receive?

Accepted Answer

20,000 × .06 × 60/360 = $200;

Question 10

The purchase price (or proceeds)of a Treasury bill would be the value of the Treasury bill plus the discount.

Accepted Answer

A) True 
 B)False

Question 11

A $120,000, 5%, 200-day note dated June 6, is discounted on October 8. The discount period is:

Accepted Answer

A) 124 days 
B) 76 days 
C) 142 days 
D) 67 days 
E) None of these 
A) 124 days 
B) 76 days 
C) 142 days 
D) 67 days 
E) None of these

Question 12

A promissory note is always an oral promise.

Accepted Answer

A) True 
 B)False

Question 13

Use ordinary interest:
 $$\begin{array} { | l | l | l | l | l | l | l | l | } 
\hline & \text { Rate of } & & \text { Maturity } & \text { Date Note } & \text { Date Note } & \text { Discount } & \
\text { Principal } & \text { Interest } & \text { Time } & \text { Value } & \text { Made } & \text { Discounted } & \text { Period } & \text { Proceeds } \
\hline \$ 60,000 & 14 \% & 60 \text { days } & \text { A } & \text { July 5 } & \text { July 20 } & \text { B } & \text { C } \
\hline
\end{array}$$ Note to be discounted at 11%

Accepted Answer

A. $61,400

Question 14

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.

Accepted Answer

12,000 × .14 × 60/360 = $280;

Question 15

Complete the following for this interest-bearing note that is discounted at 11%. (Use 360 days.)
 $\begin{array}{|l|l|l|l|l|l|l|l|} 
\hline& \text { Rate of } & & \text { Maturity } & \text { Date Note } & \text { Date Note } & \text { Discount } & \
\text { Principal } & \text { Interest } & \text { Time } & \text { Value } & \text { Made } & \text { Discounted } & \text { Period } & \text { Proceeds } \
\hline \$ 50,000 & 12 \% & 120 \text { days } & \text { A } & \text { Apr } 5 & \text { May } 20 & \text { B } & \text { C }\
\hline
\end{array}$

Accepted Answer

A. $52,000

Question 16

Banks can never deduct interest in advance on a loan.

Accepted Answer

A) True 
 B)False

Question 17

Match the following terms with their definitions.
-Discount period

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 18

On October 18, Blue Ridge Corporation accepted a $300,000 non-interest-bearing note from Long Corporation. What is the maturity value of the note? Use ordinary interest.

Accepted Answer

$300,000;

Question 19

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:

Accepted Answer

A) $1,517.97 
B) $1,517.79 
C) $15,249.73 
D) $15,249.37 
E) None of these 
A) $1,517.97 
B) $1,517.79 
C) $15,249.73 
D) $15,249.37 
E) None of these

Question 20

Compute (A)bank discount, (B)proceeds for the following simple discount (use ordinary interest), and (C)the effective interest rate to nearest hundredth percent.
Face Value = $12,000, Discount Rate = 10%, Time = 125 days

Accepted Answer

A. $12,000 × .10 × 125/360 = $

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

Justin discounts a 115-day note for $26,000 at 8.5%. The effective rate of interest to the nearest tenth percent is:

Shelley Corporation discounted a $7,000, 90-day note dated June 18, at the Sunshine Bank on July 18 at a discount rate of 12%. (Assume the $7,000 is the maturity value.)The amount of bank discount is:

Calculate maturity value for the interest-bearing note using ordinary interest: Face Value Interest Rate Time in Days \ 42,000 13\% 79

On July 18, Aui Lester accepted a $15,000, 7%, 180-day note from Ryan O'Flynn. On October 5, Aui discounted the note at Brome Bank at 8%. What proceeds did Aui receive? Use ordinary interest. 3/43 / 43/4 1/41 / 41/4

Match the following terms with their definitions. -Bank discount rate

Match the following terms with their definitions. -Maker

The maker of a promissory note:

The principal of a promissory note is the face value.

Able Co. accepted a $20,000 note on March 10 with terms of 6%, 60 days. Able Co. discounted the note on March 20, at the Green Bank at 7%. Use ordinary interest. What net proceeds did Able receive?

The purchase price (or proceeds)of a Treasury bill would be the value of the Treasury bill plus the discount.

A $120,000, 5%, 200-day note dated June 6, is discounted on October 8. The discount period is:

A promissory note is always an oral promise.

Use ordinary interest: Rate of Maturity Date Note Date Note Discount Principal Interest Time Value Made Discounted Period Proceeds \ 60,000 14\% 60 days A July 5 July 20 B C Note to be discounted at 11%

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.

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 \ 50,000 12\% 120 days A Apr 5 May 20 B C

Banks can never deduct interest in advance on a loan.

Match the following terms with their definitions. -Discount period

On October 18, Blue Ridge Corporation accepted a $300,000 non-interest-bearing note from Long Corporation. What is the maturity value of the note? 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:

Compute (A)bank discount, (B)proceeds for the following simple discount (use ordinary interest), and (C)the effective interest rate to nearest hundredth percent. Face Value = $12,000, Discount Rate = 10%, Time = 125 days

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On July 18, Aui Lester accepted a $15,000, 7%, 180-day note from Ryan O'Flynn. On October 5, Aui discounted the note at Brome Bank at 8%. What proceeds did Aui receive? Use ordinary interest. $3 / 4$ $1 / 4$