Question 1

A promissory note is always an oral promise.

Accepted Answer

A) True 
 B)False

Question 2

The discount period represents the exact number of days the original lender will have to wait for the note to come due.

Accepted Answer

A) True 
 B)False

Question 3

The maturity value of a non-interest-bearing note is the same as its face value.

Accepted Answer

A) True 
 B)False

Question 4

On March 12, Bill Jones accepted a $12,000 note in granting a time extension of a bill for goods purchased by Ron Prentice. Terms of the note were 13% for 90 days. On April 24, Bill could no longer wait for the money and discounted the note at Able Bank at a discount rate of 14%. The proceeds to Bill are:

Accepted Answer

A)  $12,047.90 
B)  $12,163.54 
C)  $12,390.00 
D)  $12,048.90 
E)  None of these

Question 5

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)  .8% 
B)  .87% 
C)  8.5% 
D)  8.7% 
E)  None of these

Question 6

Use ordinary interest:
  
A. $18,480;
B. 31;
C. $18,320.87

Accepted Answer

The answer of Use ordinary interest:
  
A. $18,480;
B. 31;
C....

Question 7

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

Accepted Answer

A)  8.20% 
B)  8.16% 
C)  8.17% 
D)  9.00% 
E)  None of these

Question 8

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

The answer of Able Co. accepted a $20,000 note on...

Question 9

A simple discount note does not involve a bank discount.

Accepted Answer

A) True 
 B)False

Question 10

Proceeds from discounting an interest-bearing note is the principal minus the bank discount.

Accepted Answer

A) True 
 B)False

Question 11

Morris Bank discounts a 100-day note for $6,000 at 11%. Find (A) bank discount and (B) proceeds. Use ordinary interest.
A. $183.33;
B. $5,816.67

Accepted Answer

The answer of Morris Bank discounts a 100-day note for...

Question 12

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

The answer of Jone Corporation accepted a $25,000, 8%, 120-day...

Question 13

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?

Accepted Answer

The answer of Abe Corp. discounted a 120-day note with...

Question 14

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

Question 15

Molly Lenny bought a $10,000 13-week Treasury bill at 13%. What is her effective rate? Use ordinary interest. Round to nearest hundredth percent.

Accepted Answer

The answer of Molly Lenny bought a $10,000 13-week Treasury...

Question 16

The maker of a promissory note issues the note.

Accepted Answer

A) True 
 B)False

Question 17

Compute bank discount using (A) ordinary interest, (B) proceeds, and (C) effective interest rate to the nearest hundredth. Do not round denominator in your calculation.
  
A. $385;
B. $8,615;
C. 14.63%

Accepted Answer

The answer of Compute bank discount using (A) ordinary interest,...

Question 18

A promissory note:

Accepted Answer

A)  Is an oral promise 
B)  Is a conditional promise 
C)  Has a fixed time 
D)  Has a variable time in the future to be paid 
E)  None of these

Question 19

The payee of a promissory note is extending the credit.

Accepted Answer

A) True 
 B)False

Question 20

A $15,000, 6%, 50-day note dated November 8, is discounted at 5% on November 28. The proceeds of the note would be:

Accepted Answer

A)  $14,936.46 
B)  $15,610.64 
C)  $63.54 
D)  $15,061.98 
E)  None of these

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

A promissory note is always an oral promise.

The discount period represents the exact number of days the original lender will have to wait for the note to come due.

The maturity value of a non-interest-bearing note is the same as its face value.

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

Use ordinary interest: A. $18,480; B. 31; C. $18,320.87

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

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?

A simple discount note does not involve a bank discount.

Proceeds from discounting an interest-bearing note is the principal minus the bank discount.

Morris Bank discounts a 100-day note for $6,000 at 11%. Find (A) bank discount and (B) proceeds. Use ordinary interest. A. $183.33; B. $5,816.67

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.

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?

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

Molly Lenny bought a $10,000 13-week Treasury bill at 13%. What is her effective rate? Use ordinary interest. Round to nearest hundredth percent.

The maker of a promissory note issues the note.

Compute bank discount using (A) ordinary interest, (B) proceeds, and (C) effective interest rate to the nearest hundredth. Do not round denominator in your calculation. A. $385; B. $8,615; C. 14.63%

A promissory note:

The payee of a promissory note is extending the credit.

A $15,000, 6%, 50-day note dated November 8, is discounted at 5% on November 28. The proceeds of the note would be: