Explanation Given Information: On May 5 a third party buys the note at a 10 % discount using the bankers. Formula used: To find the exact time of the loan by the use of the sequential numbers table, follow the below steps: 1. If the beginning and the due dates of the loan falls within the same year then subtract the sequential number of beginning date from the sequential number due date. 2. If the beginning and the due dates of the loan do not fall within the same year. (a) Then subtract the sequential number of beginning date from 365. (b) And then add the sequential number of the due date to the difference from step 2(a). 3. If February 29 is between the beginning and due dates, add 1 to the difference from step 1 or the sum from step 2(b). The total amount of money due at the end of a loan period, that is, the amount of the loan and the interest, is called the maturity value of the loan. It is given by adding the principal and the interest. Maturity value = principal + interest M V = P + I M V = P + P R T M V = P ( 1 + R T ) The third party discount for the third party discount rate is given by, Third party discount = maturity value of original note × discount rate × discount period I = P R T Calculation: It is required to find third party discount of the original note based on exact interest with 8.25 % annual simple interest held by Hugh’s for $ 19 , 500 made on February 15 and due on July 20 such that on May 5, a third party buys the note at a 10 % discount using the bankers. First, find the exact time of the note. Here the beginning date is February 15 and the due date is July 20 which falls within the same year. To find the exact time of a loan by the use of the sequential numbers table, subtract the sequential number of beginning date from the sequential number of due date. From table 11-1, observe that the beginning date’s sequential number is 46 and the due date’s sequential number is 201. This gives 201 − 46 = 155 . So, the exact time of a note made on February 15 and due on July 20 is 155 days. Find the maturity value, substitute P = $ 19 , 500 ; R = 8

11th Edition

ISBN: 8220103632072

Author: NOBLE

Publisher: Pearson Education (US)

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Chapter 11.3, Problem 3-3SC

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To calculate: The third party discount of the original note based on exact interest with 8.25% annual simple interest held by Hugh’s for $19,500 made on February 15 and due on July 20.

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Chapter 11.3, Problem 3-2SC

Chapter 11.3, Problem 3-4SC

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Chapter 11 Solutions

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Ch. 11.1 - Prob. 1-1SC Ch. 11.1 - Prob. 1-2SC Ch. 11.1 - Prob. 1-3SC Ch. 11.1 - Prob. 1-4SC Ch. 11.1 - Prob. 2-1SC Ch. 11.1 - Prob. 2-2SC Ch. 11.1 - Prob. 2-3SC Ch. 11.1 - Prob. 2-4SC Ch. 11.1 - Prob. 3-1SC Ch. 11.1 - Prob. 3-2SC

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The third party discount of the original note based on exact interest with 8.25 % annual simple interest held by Hugh’s for $ 19 , 500 made on February 15 and due on July 20.

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To calculate: The third party discount of the original note based on exact interest with 8.25% annual simple interest held by Hugh’s for $19,500 made on February 15 and due on July 20.

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