Can someone help me with this problem:
On September 5, Sheffield Company discounted at Sunshine Bank a $9,000 (maturity value), 120-day note dated June 5. Sunshine’s discount rate was 9%. (Use Days in a year table.)
What proceeds did Sheffield Company receive? (Use 360 days a year. Do not round intermediate calculations.)
To calculate the proceeds that Sheffield Company received, you need to follow a few steps:
Step 1: Calculate the interest for the 120-day period
To calculate the interest, you need to find the interest rate for the 120-day period. Since the discount rate is given as an annual rate, you will need to adjust it for the 120-day period.
Interest = Principal * Rate * Time
Principal = $9,000
Rate = 9% or 0.09 (annual rate)
Time = 120/360 (since there are 360 days in a year)
Now you can calculate the interest:
Interest = $9,000 * 0.09 * (120/360)
Step 2: Calculate the proceeds
The proceeds are calculated by subtracting the interest from the maturity value.
Proceeds = Maturity value - Interest
Maturity value = $9,000
Interest (calculated in step 1) = $9,000 * 0.09 * (120/360)
Now you can calculate the proceeds:
Proceeds = $9,000 - ($9,000 * 0.09 * (120/360))
By plugging in the values, you can calculate the proceeds received by Sheffield Company.
To find the proceeds that Sheffield Company received, we need to calculate the amount of discount on the note.
First, let's find the number of days between June 5 and September 5:
Number of days = 120 days
Next, let's calculate the discount amount using the discount rate of 9%:
Discount amount = Maturity value * Discount rate * Number of days / 360
Discount amount = $9,000 * 0.09 * 120 / 360
Now, let's find the proceeds that Sheffield Company received:
Proceeds = Maturity value - Discount amount
Proceeds = $9,000 - ( $9,000 * 0.09 * 120 / 360 )
Calculating the above equation will give us the proceeds that Sheffield Company received.