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Promissory Notes

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On September 5th, Sheffield Company discounted at Sunshine Bank a 9000.00 (maturity value), 120-day note dated June 5th. Sunshine's discount rate was 9%. What proceeds did sheffield company receive. We are using 360 day and NOT 365

  • Promissory Notes - ,

    I did it both ways, 360 and 365. Look again

  • copy of that part - ,

    If we used a banker's 360 day year, 120 days is 1/3 year
    interest = (9,000/3)*.09 = 270.00
    and the company gets
    9,000-270 = 8730
    Note that the company gets less and the bank gets more using a "banker's year"

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