Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller

Exercise 158

Find the discount to the nearest cent, then find the proceeds. (See Example.)
Finding Discount and Proceeds
Jim Peterson signs a simple discount note with a face or maturity value of $35,000 so that he can purchase a truck with plow for his snow removal business. The banker discounts the 10-month note at 9%. Find the amount of the discount and the proceeds.
SOLUTION
Peterson does not receive $35,000 from the bank-that is the amount he must repay when the loan matures. Use M = $35,000, D = 9%, and
in the formula B = MDT to find the discount, which is the interest that must be paid at maturity.

The discount of $2625 is the interest charge on the loan. The proceeds that Peterson actually receives when making the loan is found using P = M ? B.

Peterson signs the discount note with a face value of $35,000, but receives $32,375. Ten months later he must pay $35,000 to the bank. The difference is interest.