On March 30, Wade accepted a nine-month $32,250 promissory note at 7% interest from one of his clients for work he completed. On April 27, he sold the note to his local bank at 9.5% interest. What were his proceeds?
To calculate the proceeds, we need to find out how much Wade received when he sold the promissory note to the bank.
First, let's determine the interest accrued on the note from March 30 to April 27.
Step 1: Calculate the interest for the 28 days in April.
Interest = Principal * Rate * Time
Interest = $32,250 * 0.07 * (28/365)
Step 2: Calculate the maturity value of the note on the sale date, April 27.
Maturity Value = Principal + Interest
Step 3: Calculate the proceeds by determining the maturity value at the bank's interest rate.
Proceeds = Maturity Value * Rate
Proceeds = (Principal + Interest) * 0.095
Now let's plug in the numbers and calculate each step.
Step 1: Calculate the interest for the 28 days in April.
Interest = $32,250 * 0.07 * (28/365) ≈ $754.25
Step 2: Calculate the maturity value of the note on the sale date, April 27.
Maturity Value = $32,250 + $754.25 ≈ $33,004.25
Step 3: Calculate the proceeds by determining the maturity value at the bank's interest rate.
Proceeds = $33,004.25 * 0.095 ≈ $3,135.41
Therefore, Wade's proceeds from selling the promissory note to the bank would be approximately $3,135.41.