Use the ordinary interest method, 360 days, to solve the following word problem. Round to the nearest cent when necessary. Richie Powers is the owner of American Eagle Boats, a manufacturer of custom pleasure boats. Because of the economic recession and slow boat sales recently, American Eagle has begun accepting promissory notes from its dealers to help finance large orders. This morning American Eagle accepted a 90 day, 8.6% promissory note for $800,000 from one of its sales dealers. You are a manager for a bank, and Richie is one of your clients. Your bank's discount rate is currently 14%. Richie's goal is to discount the note as soon as possible, but not until the proceeds are at least equal the face value of the note, $800,000. (a) As his banker, Richie has asked you to "run the numbers" at ten day intervals starting with day 20 and advise him as to when he can discount the note and still receive his $800,000. Find the bank discount (in $) for days 20, 30, and 40, and indicate for each discount whether it is too high or whether it is low enough for Richie to discount the note and still receive his $800,000. Day 20: $ -Select-- Day 30: $ Select V Day 40: $ -Select- v (b) (Challenge) Calculate the exact day the note should be discounted to meet Richie's goal. Day
Use the ordinary interest method, 360 days, to solve the following word problem. Round to the nearest cent when necessary. Richie Powers is the owner of American Eagle Boats, a manufacturer of custom pleasure boats. Because of the economic recession and slow boat sales recently, American Eagle has begun accepting promissory notes from its dealers to help finance large orders. This morning American Eagle accepted a 90 day, 8.6% promissory note for $800,000 from one of its sales dealers. You are a manager for a bank, and Richie is one of your clients. Your bank's discount rate is currently 14%. Richie's goal is to discount the note as soon as possible, but not until the proceeds are at least equal the face value of the note, $800,000. (a) As his banker, Richie has asked you to "run the numbers" at ten day intervals starting with day 20 and advise him as to when he can discount the note and still receive his $800,000. Find the bank discount (in $) for days 20, 30, and 40, and indicate for each discount whether it is too high or whether it is low enough for Richie to discount the note and still receive his $800,000. Day 20: $ -Select-- Day 30: $ Select V Day 40: $ -Select- v (b) (Challenge) Calculate the exact day the note should be discounted to meet Richie's goal. Day
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Use the ordinary interest method, 360 days, to solve the following word problem. Round to the nearest cent when necessary.
Richie Powers is the owner of American Eagle Boats, a manufacturer of custom pleasure boats. Because of the economic recession and slow boat sales recently, American Eagle has begun accepting promissory
notes from its dealers to help finance large orders. This morning American Eagle accepted a 90 day, 8.6% promissory note for $800,000 from one of its sales dealers.
You are a manager for a bank, and Richie is one of your clients. Your bank's discount rate is currently 14%. Richie's goal is to discount the note as soon as possible, but not until the proceeds are at least equal to
the face value of the note, $800,000.
(a) As his banker, Richie has asked you to "run the numbers" at ten day intervals starting with day 20 and advise him as to when he can discount the note and still receive his $800,000.
Find the bank discount (in $) for days 20, 30, and 40, and indicate for each discount whether it is too high or whether it is low enough for Richie to discount the note and still receive his $800,000.
Day 20:
Day 30:
-Select-
---Select--
Select- V
Day 40:
$
$
$
(b) (Challenge) Calculate the exact day the note should be discounted to meet Richie's goal.
Day
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