Calculate (a) interest and maturity value, (b) discount period, (c) bank discount, and (d) proceeds. Assume ordinary interest. (Round answers to nearest hundredths)
Date of note Face value Length of note Interest rate Bank discount rate Date of discount
Feb. 12 $80,000 150 days 8% 4% Jun 12
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To calculate the different components, we need to use the formulas for interest, maturity value, discount period, bank discount, and proceeds. Here's how you can calculate each one:
(a) Interest and Maturity Value:
Interest = Face Value * Interest Rate * (Length of Note / 360)
Maturity Value = Face Value + Interest
For this example:
Interest = $80,000 * 8% * (150 / 360) ≈ $2,666.67
Maturity Value = $80,000 + $2,666.67 = $82,666.67
(b) Discount Period:
Discount Period = Date of Discount - Date of Note
For this example:
Discount Period = Jun 12 - Feb 12 = 120 days
(c) Bank Discount:
Bank Discount = Face Value * Bank Discount Rate * (Discount Period / 360)
For this example:
Bank Discount = $80,000 * 4% * (120 / 360) ≈ $1,066.67
(d) Proceeds:
Proceeds = Face Value - Bank Discount
For this example:
Proceeds = $80,000 - $1,066.67 ≈ $78,933.33
So, the answers to the given problem are:
(a) Interest and Maturity Value = $2,666.67 and $82,666.67
(b) Discount Period = 120 days
(c) Bank Discount = $1,066.67
(d) Proceeds = $78,933.33