A loan of 15700 was charged a simple discount rate of 4.2%. If the proceeds received were 15463.72, find the amount of bank discount. Hence, find the discount period in days. 365 days – Non leap year366 days - Leap yearD = SdtHOW TO DETERMINE LEAP YEAR?Where: D- Bank discountExample:2016 + 4 = 504 (leap year) – no remainder2019 + 4 = 504.75 (non-leap year) – with remainderS- Amount of maturity valued- Discount ratet- Term of discount in yearsProceeds = Maturity Value - Bank DiscountProceeds = S - DMaturity Value = Face Value + InterestS = P +1S = P + PrtS= P(1 + rt)Proceeds = S- SdtProceeds = S(1- dt)Discount Rate Equivalent toSimple Interest RateSimple Interest RateEquivalent to Discount Rated :1+ rtdr =1- dt

find the amount of bank discount.:: Bank discount=Proceeds -Maturity value=$15463.72-$15700=238.28$…

Answered: loan of 15700 was charged a simple…

loan of 15700 was charged a simple discount rate of 4.2%. If the proceeds received were 15463.72, find the amount of bank discount. Hence, find the discount period in days.

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 loan of 15700 was charged a simple discount rate of 4.2%. If the proceeds received were 15463.72, find the amount of bank discount. Hence, find the discount period in days.

365 days – Non leap year
366 days - Leap year
D = Sdt
HOW TO DETERMINE LEAP YEAR?
Where: D- Bank discount
Example:
2016 + 4 = 504 (leap year) – no remainder
2019 + 4 = 504.75 (non-leap year) – with remainder
S- Amount of maturity value
d- Discount rate
t- Term of discount in years
Proceeds = Maturity Value - Bank Discount
Proceeds = S - D
Maturity Value = Face Value + Interest
S = P +1
S = P + Prt
S= P(1 + rt)
Proceeds = S- Sdt
Proceeds = S(1- dt)
Discount Rate Equivalent to
Simple Interest Rate
Simple Interest Rate
Equivalent to Discount Rate
d :
1+ rt
d
r =
1- dt

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