Explanation Given Information: Face value is $ 22 , 500 , the discount rate is 10 1 2 % , the time period is 60 days. Formula used: The formula to compute the amount of bank discount is, Bank Discount = Face value × Discount Rate × Time The formula to calculate the amount of proceeds is, Proceeds = Face value − Discount The formula to calculate the effective rate of discount is, Effective interest rate = Interest Purchase Price × Time Calculation: Consider that the face value of the loan is $ 22 , 500 , the discount rate is 10 1 2 % and the time period is 60 days. Simplify the discount rate as 10 1 2 % = 21 2 % = 10.5 % = 10.5 100 = 0.105 Evaluate the time as Time = Number of days of a loan 360 = 60 360 Substitute $ 22 , 500 for face value, 0.105 for the discount rate and 60 360 for time in the formula Bank Discount = Face value × Discount Rate × Time as, Bank Discount = Face value × Discount Rate × Time = 22 , 500 × 0.105 × 60 360 = $ 393.75 Hence, the amount of discount is $ 393

Contemporary Mathematics for Business and Consumers

7th Edition

ISBN: 9781285189758

Author: Robert Brechner, George Bergeman

Publisher: Cengage Learning

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Chapter 10, Problem 22AT

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To calculate: The amount of bank discount, proceeds value and effective rate of discount where face value is $22,500, the ordinary discount rate is 1012%, the time period is 60 days.

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Chapter 10, Problem 21AT

Chapter 10, Problem 23AT

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Chapter 10 Solutions

Contemporary Mathematics for Business and Consumers

Ch. 10.I - Find the amount of interest on each of the...Ch. 10.I - Joe Hale goes to a credit union and borrows...Ch. 10.I - Prob. 3TIE Ch. 10.I - Prob. 4TIE Ch. 10.I - a. A loan was made on April 4 and had a due date...Ch. 10.I - a. What is the maturity date of a loan taken out...Ch. 10.I - Prob. 1RE Ch. 10.I - Prob. 2RE Ch. 10.I - Prob. 3RE Ch. 10.I - Prob. 4RE

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The amount of bank discount, proceeds value and effective rate of discount where face value is $ 22 , 500 , the ordinary discount rate is 10 1 2 % , the time period is 60 days.

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To calculate: The amount of bank discount, proceeds value and effective rate of discount where face value is $22,500, the ordinary discount rate is 1012%, the time period is 60 days.

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Chapter 10 Solutions