Hafers, an electrical supply company, sold $4,800, 12%, 90-day note for a time extension of a bill for goods bought by Ron Prentice. On June 12, Scott discounted the note at Able Bank at 10%. What proceeds does Scott receive?
To determine the proceeds that Scott receives after discounting the note, we need to calculate the amount of interest earned and subtract it from the face value of the note.
First, let's find out the amount of interest Hafers will earn on the note.
Interest = Principal × Rate × Time
Principal = $4,800
Rate = 12% (expressed as a decimal, so 0.12)
Time = 90 days (since it's a 90-day note)
Interest = $4,800 × 0.12 × (90/360)
Interest = $480
Now, let's calculate the amount of money Scott will receive.
Proceeds = Face Value of the Note - Interest
Face Value of the Note = $4,800
Interest = $480
Proceeds = $4,800 - $480
Proceeds = $4,320
Therefore, Scott will receive $4,320 as the proceeds from discounting the note.