Explanation Given Information: Face value is $ 1 , 240 , interest rate is 7.6 % for 140 days On 5 December, note was discounted at the rate 11.8 % and the date of the note is 12 September. Formula used: Steps for determining the maturity date of a loan are: Step1. Calculate the number of days that are left in the month loan is taken by subtracting the loan date from the number of days in the month. Step2. Subtract the number of days remaining in the first month from the total duration of loan. Step3. Keep on subtracting the days from consequent months until the maturity date corresponds to the difference. The formula to calculate Maturity value is, M V = P ( 1 + R T ) Where, MV is Maturity value, P is Principal Amount, R is the rate of interest, and T is the time duration. Steps for determining number of days of a loan are: Step1. Calculate the number of days that are left in the month loan is taken by subtracting the loan date from the number of days in the month. Step2. Determine the number of days for next succeeding months. Step3. Calculate the number of days that are left in the last month till the due date. Step4. Add all the days calculated. 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 = Maturity value × Discount Rate × Time The formula to calculate amount of proceeds is, Proceeds = Maturity value − Discount Calculation: Calculate the number of days that are left in the month when the loan was taken by subtracting the loan date from the number of days in the month as: Number of days left = Total days in that month − Loan Date =30 − 12 =18 Subtract the number of days left that were left when the loan was taken from the total duration of the loan as: 140 − 18 = 122 In the month of October, November and December, there are total of 92 days. So, out of 122 days, 92 will be utilized by the month of October, November and December. Now, total number of remaining days are 30 . So, maturity date is January 30 . Consider that principal amount is $ 1 , 240 , rate of interest is 7.6 % , time duration is 140 days. Simplify the rate of interest as, 9 % = 9 100 = 0.09 The principal amount is same as the face value. Compute the maturity value by substituting $ 1 , 240 for principal amount, 0.076 for rate of interest, 140 360 for time duration in the formula, “ M V = P ( 1 + R T ) ” as, M V = P ( 1 + R T ) = $ 1 , 240 ( 1 + 0.076 × 140 360 ) = $ 1 , 240 ( 1 + 0

Contemporary Mathematics for Business & Consumers

8th Edition

ISBN: 9781305886803

Author: Brechner

Publisher: Cengage

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Chapter 10.III, Problem 20RE

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To calculate: The maturity date, maturity value, discount period and proceeds of the promissory note where face value is $1,240, interest rate is 7.6% for 140 days. On 5 December, note was discounted at the rate 11.8% and the date of the note is 12 September.

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Chapter 10.III, Problem 19RE

Chapter 10.III, Problem 21RE

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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 maturity date, maturity value, discount period and proceeds of the promissory note where face value is $ 1 , 240 , interest rate is 7.6 % for 140 days. On 5 December, note was discounted at the rate 11.8 % and the date of the note is 12 September.

Solution Summary: The author calculates the maturity date, maturity value, discount period, and proceeds of a promissory note.

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To calculate: The maturity date, maturity value, discount period and proceeds of the promissory note where face value is $1,240, interest rate is 7.6% for 140 days. On 5 December, note was discounted at the rate 11.8% and the date of the note is 12 September.

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Chapter 10 Solutions