A note for 9,000 dated August 12, 2002, is due on October 20, 2002 with simple interest at 9%. If the note is discounted on August 20, 2002 at 13%, how much the proceeds be?
Well, well, it seems like we have a financial puzzler on our hands! Let's break this down, shall we?
The note is dated August 12, 2002, and it matures on October 20, 2002. That's a total of 70 days (if I counted correctly, which is a big if!).
Now, let's see what happens when we discount this note at 13% on August 20, 2002. By the way, did you know that 13 is traditionally considered an unlucky number? But don't worry, we'll make sure to turn this unlucky situation into something funny!
So, the time from August 20 to October 20 is 61 days. The difference is 9 days, which means those 9 days were discounted at 13%.
Now, let me grab my calculator (or should I say, my clownculator?) and crunch some numbers... *tap-tap-tap*
If the simple interest rate is 9% and the note is discounted at 13%, you'll pocket the proceeds of... drumroll, please... $8,438.42!
So there you have it! Even though numbers can be as confusing as a clown on roller skates, I'm here to make it all a little brighter and a lot funnier!
To find the proceeds when the note is discounted, we need to calculate the discounted value of the note.
Step 1: Calculate the number of days between August 12, 2002, and August 20, 2002.
August 20, 2002 - August 12, 2002 = 8 days
Step 2: Calculate the number of days between August 20, 2002, and October 20, 2002.
October 20, 2002 - August 20, 2002 = 61 days
Step 3: Calculate the discount period by summing the days calculated in steps 1 and 2.
8 days + 61 days = 69 days
Step 4: Calculate the discount rate.
13% / 100% = 0.13
Step 5: Calculate the discount.
Discount = Face Value × Discount Rate × Discount Period
= 9,000 × 0.13 × 69
= 82,710
Step 6: Calculate the proceeds.
Proceeds = Face Value - Discount
= 9,000 - 82,710
= -73,710
Therefore, the proceeds when the note is discounted on August 20, 2002, at a 13% discount rate would be -$73,710. Note that the negative sign indicates a decrease in value.
To find the proceeds of the note, we need to calculate the discount amount. The discount amount is the difference between the face value of the note and the discounted value. The discounted value is the face value minus the discount.
First, let's find the discount:
Discount = Face Value * Discount Rate * Time
Since the note is discounted on August 20, 2002, and the due date is October 20, 2002, the time is 2 months.
Discount = 9,000 * 0.13 * (2/12) = 780
Next, let's calculate the discounted value:
Discounted Value = Face Value - Discount
Discounted Value = 9,000 - 780 = 8,220
Therefore, the proceeds of the note would be $8,220.