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12 May, 11:34

Hafers, an electrical supply company, sold $4,800 of equipment to Jim Coates Wiring, Inc. Coates signed a promissory note May 12 with 4.5% interest. The due date was August 10. Short of funds, Hafers contacted Charter One Bank on July 20; the bank agreed to take over the note at a 6.2% discount. (Use Days in a year table.) What proceeds will Hafers receive? (Use 360 days a year. Do not round intermediate calculations. Round your final answer to the nearest cent.)

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  1. 12 May, 11:55
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    The Net value of the Note is $4836.44

    Explanation:

    Days between May 12 to May 31st = 19

    Days in June=30

    Days in July = 31

    Days in August = 10

    Total Days=19+30+31+10=90

    Loan Interest

    4800 * 90/360 * 4.5/100

    = $54

    Total Amount due = Face Value+Loan Interest

    =$4800+54

    =$4854

    Now the days left in maturity are given as

    Days between July 20 and August 10 = 21 days

    Total Number of Days in the year is 360

    Rate of Discount is 6.2% so

    4854 * 21/360 * 6.2/100

    Discount by bank is $17.56

    So the net value of the note is given as

    Net Value=Amount Due-Discount

    =$4854-$17.56

    =$4836.44

    So the Net value of the Note is $4836.44
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