Webster Digital received a promissory note of $8,000 for 9 months at 7% simple interest from one of its customers. After 4 months, the note was discounted at Bank of Aventura at a discount rate of 10%. What are the proceeds Webster Digital will receive from the discounted note?
$8,069.17
To calculate the proceeds Webster Digital will receive from the discounted note, we need to calculate two things:
1. The amount of interest that has accrued on the note after 4 months.
2. The discount that will be applied to the remaining principal when the note is discounted.
Let's start with the first calculation:
Step 1: Calculate the interest accrued after 4 months.
The formula to calculate simple interest is:
Interest = Principal x Rate x Time
Here, the principal is $8,000, the rate is 7% (or 0.07), and the time is 4 months (or 4/12 years since the interest rate is stated as an annual rate).
Interest = $8,000 x 0.07 x (4/12)