A building contractor gives a $15,000 promissory note to a plumber who has oaned him $15,000. The note is due in 9 months with interest at 8%. Three months after the note is signed, the plumber sells it to a bank. If the bank gets a 9% return on its investment, how much will the plumber receive? Will it be enough to pay a bill for $ 15,285? How much will the plumber receive?

A building contractor gives a $15,000 promissory note to a plumber who has oaned him $15,000. The note is due in 9 months with interest at 8%. Three months after the note is signed, the plumber sells it to a bank. If the bank gets a 9% return on its investment, how much will the plumber receive? Will it be enough to pay a bill for $ 15,285? How much will the plumber receive?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A building contractor gives a $15,000 promissory note to a plumber who has
loaned him $15,000. The note is due in 9 months with interest at 8%. Three months
after the note is signed, the plumber sells it to a bank. If the bank gets a 9% return
on its investment, how much will the plumber receive? Will it be enough to pay a
bill for $ 15,285? How much will the plumber receive?

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Step 1: Definition of promissory note:

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Step 2: Working note- Calculation of maturity value of note:

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Step 3: Calculation of the amount that will be received by the plumber:

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