Explanation Given Information: Face value is $ 6 , 505 , discount rate is 10.39 % , time period is 73 days. Formula used: The formula to calculate the time for ordinary interest is, Time = Number of days of a loan 360 The formula to compute the amount of bank discount is, Bank Discount = Face value × Discount Rate × Time The formula to calculate amount of proceeds is, Proceeds = Face value − Discount The formula to calculate effective rate of interest is, Effective interest rate = Interest Purchase Price × Time Calculation: Consider the face value of loan is $ 6 , 505 , discount rate is 10.39 % and time period is 73 days. Compute the discount amount, Simplify the discount rate as, 10.39 % = 10.39 100 = 0.1039 Evaluate the time as, Time = Number of days of a loan 360 = 73 360 Substitute $ 6 , 505 for face value, 0.1039 for discount rate and 73 360 for time in the formula “ Bank Discount = Face value × Discount Rate × Time ” as, Bank Discount = Face value × Discount Rate × Time = 6 , 505 × 0

Contemporary Mathematics for Business & Consumers

8th Edition

ISBN: 9781305585447

Author: Robert Brechner, Geroge Bergeman

Publisher: Cengage Learning

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Chapter 10.III, Problem 12RE

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To calculate: The amount of bank discount, proceeds value and effective rate of interest where face value is $6,505, discount rate is 10.39%, time period is 73 days.

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Chapter 10.III, Problem 11RE

Chapter 10.III, Problem 13RE

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Chapter 10 Solutions

Contemporary Mathematics for Business & 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 interest where face value is $ 6 , 505 , discount rate is 10.39 % , time period is 73 days.

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To calculate: The amount of bank discount, proceeds value and effective rate of interest where face value is $6,505, discount rate is 10.39%, time period is 73 days.

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Chapter 10 Solutions