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 & Consumers - With LMS CengageNOW

8th Edition

ISBN: 9781337125468

Author: Brechner

Publisher: Cengage

See similar textbooks

Concept explainers

Unitary Method

The word “unitary” comes from the word “unit”, which means a single and complete entity. In this method, we find the value of a unit product from the given number of products, and then we solve for the other number of products.

Speed, Time, and Distance

Imagine you and 3 of your friends are planning to go to the playground at 6 in the evening. Your house is one mile away from the playground and one of your friends named Jim must start at 5 pm to reach the playground by walk. The other two friends are 3 …

Profit and Loss

The amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item.

Units and Measurements

Measurements and comparisons are the foundation of science and engineering. We, therefore, need rules that tell us how things are measured and compared. For these measurements and comparisons, we perform certain experiments, and we will need the experime…

Videos

Question

Chapter 10, Problem 22AT

To determine

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.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 10, Problem 21AT

Chapter 10, Problem 23AT

Students have asked these similar questions

choose true options in these from given question a) always full and always crossing. b) always full and sometimes crossing. c) always full and never crossing. d) sometimes full and always crossing. e) sometimes full and sometimes crossing. f) sometimes full and never crossing. g) never full and always crossing. h) never full and sometimes crossing. i) never full and never crossing.

At a Noodles & Company restaurant, the probability that a customer will order a nonalcoholic beverage is 0.49. Find the probability that in a sample of 13 customers, at least 7 will order a nonalcoholic beverage

10. In the general single period market model with = {W1, W2, W3}, one risky asset, S, and a money market account, we have So = 4 for the risky asset. Moreover, the effective rate of interest on the money market account is 5% and at time t = 1 we have W1 W2 W3 S₁ 100 50 40 21 21 21 (a) Calculate all risk-neutral probability measures for this model. [4 Marks] (b) State if the model is arbitrage-free. Give a brief reason for your answer. [2 Marks] (c) A large bank has designed an investment product with payoff X at time t = 1. Given W₁ W2 W3 X 0 1 1.5 show that X is an attainable contingent claim. [4 marks]

Chapter 10 Solutions

Contemporary Mathematics for Business & Consumers - With LMS CengageNOW

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

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, subject and related others by exploring similar questions and additional content below.

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.

Solution Summary: The author explains how to calculate the amount of bank discount, proceeds value, and effective rate of discount.

Concept explainers

Videos

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.

Want to see the full answer?

Chapter 10 Solutions