Find (a) the exact interest and (b) the ordinary interest. Round answers to the nearest cent
Find the discount (ordinary interest) and proceeds on a promissory note for $2,000 made by Barbara Jones on February 10, 2007, and payable to First State Bank on August 10, 2007, with a discount rate of 9%.
To find the exact interest and ordinary interest on a promissory note, you will need to use the formula:
Exact Interest = Principal * Rate * Time
Ordinary Interest = Principal * Rate * Time
In this case, the Principal is $2,000 and the Rate is 9%. To find the Time, we need to calculate the number of days between the issuance date (February 10, 2007) and the payment date (August 10, 2007).
Step 1: Calculate the number of days between February 10, 2007, and August 10, 2007.
Start by finding the number of days in each month:
February: 28 days (ignoring leap year)
March: 31 days
April: 30 days
May: 31 days
June: 30 days
July: 31 days
August: 10 days (up to the 10th)
Total days = 28 + 31 + 30 + 31 + 30 + 31 + 10 = 191 days
Step 2: Convert the number of days to the corresponding time period (in years).
To find the time in years, divide the number of days by 365 (365 days in a year):
Time = 191 / 365 = 0.5233 (rounded to four decimal places)
Step 3: Calculate the Exact Interest.
Exact Interest = Principal * Rate * Time
Exact Interest = $2,000 * 0.09 * 0.5233
Exact Interest = $92.17 (rounded to the nearest cent)
Step 4: Calculate the Ordinary Interest.
Ordinary Interest = Principal * Rate * Time
Ordinary Interest = $2,000 * 0.09 * 0.5233
Ordinary Interest = $92.17 (rounded to the nearest cent)
So, the exact interest and ordinary interest on the promissory note would be both $92.17 (rounded to the nearest cent).
To find the discount (ordinary interest) and proceeds on a promissory note, we need to use the following formulas:
(a) Exact Interest: Exact Interest = principal * rate * time
(b) Ordinary Interest: Ordinary Interest = principal * rate * time * discount rate
Proceeds = principal - ordinary interest
Let's calculate the exact interest first:
Principal = $2,000
Rate = ?
Time = ?
Exact Interest = Principal * Rate * Time
To find the rate and time, we need to know the date difference between February 10, 2007, and August 10, 2007.
The time difference between these two dates is:
August 10, 2007 - February 10, 2007 = 6 months or 0.5 years
Now we can calculate the exact interest:
Exact Interest = $2,000 * Rate * 0.5
Next, we will find the ordinary interest using the discount rate of 9%:
Ordinary Interest = $2,000 * Rate * 0.5 * 0.09
Finally, we can find the proceeds:
Proceeds = $2,000 - Ordinary Interest
Let's calculate the values.