Question 6: A 21-month $6,779.99 promissory note bearing interest of 7.5% compounded monthly was sold on its date of issue to a finance company at a discount rate of 9.9% compounded monthly. Determine the proceeds of the sale.
Question 6: A 21-month $6,779.99 promissory note bearing interest of 7.5% compounded monthly was sold on its date of issue to a finance company at a discount rate of 9.9% compounded monthly. Determine the proceeds of the sale.
A 21-month $ 6,779.99 promissory note bearing interest of 7.5 % compounded monthly was sold on its date of issue to a finance company at a discount rate of 9.9 % compounded monthly . Determine the proceeds of the sale .
Computation of sale proceeds of promissory note.
t=21 months
p=$6,779.99
r=7.5% compound monthly
i=75/(100*12)
=0.00625
discount rate=9.9%
compound monthly
i=9.9/(100*12)
=0.00825 s=p(1+it)=6,779.99(1+0.00625*21)
=7669.86369
Proceeds of sale=S(1-dt)
=7669.86369(1-0.00825*21)
=6341.059
=$6341.06
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