Solve accepted a 60-day, 9 percent note from Pete Houghton in settlement of his past-due account for $6,000. On April 9, Westwood Company discounted the note at the First National Bank. The bank charged a discount rate of 12 percent. What is the amount of the proceeds

Question

Tia Clayton

Business

1 January, 20:55

Solve accepted a 60-day, 9 percent note from Pete Houghton in settlement of his past-due account for $6,000. On April 9, Westwood Company discounted the note at the First National Bank. The bank charged a discount rate of 12 percent. What is the amount of the proceeds

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Answers (1)

Know the Answer?

Jaylene Mccormick · Answer 1

Missing information:

The note was accepted on March 10

Answer:

$6,029.10

Explanation:

in order to answer the question, I assumed a 360 day year, so 60 days = 2/12 of a year

the note's value on maturity date = principal + accrued interest = $6,000 + ($6,000 x 9% x 2/12) = $6,000 + $90 = $6,090

bank charges = note's value on maturity date x discount rate x 30 days = $6,090 x 12% x 1/12 = $60.90

net proceeds = $6,090 - $60.90 = $6,029.10