Carl Sonntag wanted to compare what proceeds he would receive with a simple interest note versus a simple discount note. Both had the same terms: $19,500 at 8% for 2 years. Use ordinary interest as needed.
Well, Carl Sonntag seems to be quite the financial enthusiast! Let's unravel this money mystery, shall we?
First things first, let's tackle the simple interest note. With a principal amount of $19,500 and an interest rate of 8%, we'll have to apply the formula I = P * R * T to figure out the interest earned:
I = $19,500 * 0.08 * 2
I = $3,120
So, the interest earned with a simple interest note would be $3,120. Now onto the simple discount note.
For a simple discount note, the interest is deducted upfront. To determine the proceeds Carl would receive, we need to subtract the interest from the principal amount (kind of like a magician making money disappear):
Discount = P * R * T
Discount = $19,500 * 0.08 * 2
Discount = $3,120
Principal - Discount = Proceeds
$19,500 - $3,120 = $16,380
So, the proceeds Carl would receive with a simple discount note would be $16,380.
Now, it's up to Carl to decide whether he wants the alluring allure of a simple interest note or the sneaky disappearance of funds with a simple discount note!
To compare the proceeds from a simple interest note and a simple discount note, we need to calculate the amount received from each note.
First, let's calculate the proceeds from a simple interest note.
The formula to calculate the proceeds from a simple interest note is:
Proceeds = Principal + (Principal * Interest Rate * Time in years)
In this case:
Principal = $19,500
Interest Rate = 8% = 0.08
Time = 2 years
Proceeds from simple interest note = $19,500 + ($19,500 * 0.08 * 2)
Proceeds from simple interest note = $19,500 + ($3,120)
Proceeds from simple interest note = $22,620
So, the proceeds from a simple interest note would be $22,620.
Now, let's calculate the proceeds from a simple discount note.
The formula to calculate the proceeds from a simple discount note is:
Proceeds = Principal - (Principal * Discount Rate * Time in years)
In this case, the discount rate will be the same as the interest rate, 8% = 0.08.
Proceeds from simple discount note = $19,500 - ($19,500 * 0.08 * 2)
Proceeds from simple discount note = $19,500 - ($3,120)
Proceeds from simple discount note = $16,380
So, the proceeds from a simple discount note would be $16,380.
Therefore, Carl Sonntag would receive $22,620 from a simple interest note and $16,380 from a simple discount note.
To compare the proceeds Carl Sonntag would receive with a simple interest note versus a simple discount note, we need to calculate the amount of interest or discount for each type of note.
Let's start with the simple interest note. The formula to calculate the amount of interest on a simple interest note is:
Interest = Principal * Rate * Time
In this case, the principal (P) is $19,500, the rate (R) is 8%, and the time (T) is 2 years. Applying the formula:
Interest = $19,500 * 0.08 * 2 = $3,120
The total proceeds for Carl Sonntag with a simple interest note can be calculated by adding the interest to the principal:
Total Proceeds (Simple Interest Note) = Principal + Interest = $19,500 + $3,120 = $22,620
Now let's calculate the proceeds for a simple discount note. In this case, the discount is given upfront, and the proceeds are the remaining amount after deducting the discount from the principal.
The formula to calculate the discount on a simple discount note is:
Discount = Principal * Rate * Time
Using the same values as before:
Discount = $19,500 * 0.08 * 2 = $3,120
Now, let's calculate the total proceeds for Carl Sonntag with a simple discount note:
Total Proceeds (Simple Discount Note) = Principal - Discount = $19,500 - $3,120 = $16,380
Therefore, the total proceeds for Carl Sonntag would be $22,620 with a simple interest note and $16,380 with a simple discount note for the given terms of $19,500 at 8% for 2 years.