EBK CFIN
5th Edition
ISBN: 9781305888036
Author: BESLEY
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 1, Problem 20PROB
Summary Introduction
To determine: If it’s valid to say that fall in stock price is evidence that managers are not acting in the interest of stockholders
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The maturity value of an $35,000 non-interest-bearing, simple discount 4%, 120-day note is:
Carl Sonntag wanted to compare what proceeds he would receive with a simple interest note versus a simple discount note. Both had the same terms: $18,905 at 10% for 4 years. Use ordinary interest as needed.
Calculate the simple interest note proceeds.
Calculate the simple discount note proceeds.
What you're solving for
Solving for maturity value, discount period, bank discount, and proceeds of a note.
What's given in the problem
Face value:
$55300
Rate of interest:
10%
Length of note:
95
days
Date of note: August 23rd
Date note discounted: September 18th
Bank discount rate:9 percent
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