Hafers, an electrical supply company, sold 4800.00 of equipment to Jim Coates Wing, INC Coates signed a promissory note May 12 with 4.5% intrest. The due date was August 10. Short of funds, Hafers contacted Charter One Bank on July 20th the bank agreed to take over the note at a 6.2% discount. What proceeds will Hafers Receive? Please use 360 and not 365
4836.44 proceeds
To calculate the proceeds that Hafers will receive after the bank takes over the promissory note at a discount, we need to consider the original amount of the note, the interest rate, the time period, and the discount rate.
1. Start by calculating the interest earned from May 12 to July 20, the date when Hafers contacted Charter One Bank. Since May 12 to July 20 is 69 days (from May 12 to June 12 is 30 days, and from June 12 to July 20 is 39 days), you can use the formula:
Interest = Principal * Interest Rate * Time
Interest = $4800 * 4.5% * (69/360)
2. Next, calculate the maturity value of the note. This includes the original principal plus the interest earned. Use the formula:
Maturity Value = Principal + Interest
Maturity Value = $4800 + interest calculated in step 1
3. Determine the discount amount by multiplying the maturity value by the discount rate. Use the formula:
Discount Amount = Maturity Value * Discount Rate
Discount Amount = Maturity Value * 6.2%
4. Calculate the proceeds that Hafers will receive by subtracting the discount amount from the maturity value. Use the formula:
Proceeds = Maturity Value - Discount Amount
Proceeds = Maturity Value - discount amount calculated in step 3
By following these steps and performing the calculations, you will be able to determine the proceeds that Hafers will receive.