what is the discount period, bank discount, and proceeds on 25000.00 at 9% for 60 days, date of note is June 8 and date note discounted is July 10?
To calculate the discount period, bank discount, and proceeds, we need to understand the basic concepts involved.
Discount period: The discount period is the time between the date the note was discounted (or bought by the bank) and the maturity date of the note. In this case, the date of note is June 8, and the date note discounted is July 10. So, the discount period is 32 days (from June 8 to July 10).
Bank discount: Bank discount is the amount of money deducted in advance from the face value (or principal) of the note by the bank. It is calculated using the formula: Bank discount = (Face value of the note) * (Discount rate) * (Discount period / 360). In this case, the face value is $25,000.00, the discount rate is 9%, and the discount period is 32 days.
Proceeds: Proceeds are the amount that the issuer (borrower) receives when they sell the note to the bank. It is calculated by subtracting the bank discount from the face value of the note. So, Proceeds = (Face value of the note) - (Bank discount).
Now let's calculate the bank discount and proceeds:
Bank discount = $25,000.00 * 0.09 * (32/360)
Bank discount = $562.50
Proceeds = $25,000.00 - $562.50
Proceeds = $24,437.50
Therefore, the discount period is 32 days, the bank discount is $562.50, and the proceeds on a $25,000.00 note at 9% for 60 days are $24,437.50.