On May 15, Maynard Co. borrowed cash from Texas Bank by issuing a 90-day note with a face amount of $45,600. Assume a 360-day year. Required: a. Determine the proceeds of the note, assuming the note carries an interest rate of 8%. $ b. Determine the proceeds of the note, assuming the note is discounted at 8%.

Question

Ryleigh Rodgers

Business

20 May, 22:46

On May 15, Maynard Co. borrowed cash from Texas Bank by issuing a 90-day note with a face amount of $45,600. Assume a 360-day year. Required: a. Determine the proceeds of the note, assuming the note carries an interest rate of 8%. $ b. Determine the proceeds of the note, assuming the note is discounted at 8%.

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Coralie · Answer 1

a. $45,600

b. $45,296

Explanation:

The computation is shown below:

a. The proceed of the note is always equal to the face amount i. e $45,600

b. After considering the discounted rate, the proceed of the note is

= ($45,600) - ($45,600 * 8% * 30 days : 360 days)

= $45,600 - $304

= $45,296

After considering the discount rate and the issuing days, the proceed of the note could come