Word Problem 11-17

Hafers, an electrical supply company, sold $3,100 of equipment to Jim Coates Wiring, Inc. Coates signed a promissory note May 12 with 5.50% interest. The due date was August 22. Short of funds, Hafers contacted Charter One Bank on July 13; the bank agreed to take over the note at a 6.70% discount. (Use Days in a year table.)


What proceeds will Hafers receive? (Use 360 days a year.

A promissory note for 8000 was written on 25th June for 90days at 10% interest. It was discounted on 5th July at 12%. Find

1) the maturity valued of the note
2) maturity date of the note
3) the days of the discount
4) discount amount
5) the proceeds.

To calculate the proceeds that Hafers will receive, we need to find the discounted amount of the promissory note.

First, let's calculate the interest on the promissory note. We can use the formula:

Interest = (Principal) x (Rate) x (Time)

Where:
Principal = $3,100
Rate = 5.50% per annum = 5.50/100 = 0.055
Time = number of days the promissory note is outstanding (from May 12 to July 13)

Using the Days in a year table, we have:
Number of days from May 12 to July 13 = 63 days

Now, let's calculate the interest:
Interest = $3,100 x 0.055 x (63/360)
= $289.63

Next, we need to find the discounted amount of the promissory note. We can use the formula:

Discounted amount = Principal - Interest

Discounted amount = $3,100 - $289.63
= $2,810.37

Lastly, we need to calculate the proceeds that Hafers will receive from the bank. Since the bank agreed to take over the note at a 6.70% discount, the proceeds will be:

Proceeds = Discounted amount x (1 - discount rate)

Using the 360-day year:
Proceeds = $2,810.37 x (1 - 6.70/100)
= $2,810.37 x (1 - 0.067)
= $2,810.37 x 0.933
≈ $2,623.44

Therefore, Hafers will receive approximately $2,623.44 as proceeds from the bank.