Question:
On March 31, Dower Publishing discounted a $30,000 note at a local bank. The note was dated February
28 and required the payment of the principal amount and interest at 6% on May 31. The bank’s discount
rate is 8%. How much cash will Dower receive from the bank on March 31?
Answer:
$30,000 Face amount
450 Interest to maturity ($30,000 x 6% x 3/12)
30,450 Maturity value
(406) Discount ($30,450 x 8% x 2/12)
$30,044 Cash proceeds
On March 31, Dower Publishing discounted a $30,000 note at a local bank. The note was dated February
28 and required the payment of the principal amount and interest at 6% on May 31. The bank’s discount
rate is 8%. How much cash will Dower receive from the bank on March 31?
Answer:
$30,000 Face amount
450 Interest to maturity ($30,000 x 6% x 3/12)
30,450 Maturity value
(406) Discount ($30,450 x 8% x 2/12)
$30,044 Cash proceeds
