A six-month note would mature on 15 December 2020 with a maturity value of RM3750. The
note is discounted two months before the maturity date and proceeds received are
RM3718.75. Find:
i. The date of the note
ii. The discount date
iii. The bank discount amount that is charged
iv. The discount rate that is charged
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Need answers
To solve the given problem, we need to determine the date of the note, the discount date, the bank discount amount charged, and the discount rate charged. Let's break down each step:
i. Determining the date of the note:
The note would mature on 15 December 2020. Since it is a six-month note, we need to subtract six months from the maturity date:
15 December 2020 - 6 months = 15 June 2020
Thus, the date of the note is 15 June 2020.
ii. Determining the discount date:
The note is discounted two months before the maturity date. To find the discount date, we subtract two months from the maturity date:
15 December 2020 - 2 months = 15 October 2020
Therefore, the discount date is 15 October 2020.
iii. Calculating the bank discount amount charged:
The proceeds received from the note are RM3718.75. The maturity value of the note is RM3750. The bank discount is calculated as the difference between the maturity value and the proceeds received:
Bank discount = Maturity value - Proceeds received
Bank discount = RM3750 - RM3718.75
Bank discount = RM31.25
Therefore, the bank discount amount charged is RM31.25.
iv. Calculating the discount rate charged:
To determine the discount rate charged, we can use the formula:
Discount rate = (Bank discount / Maturity value) x (360 / Time period)
In this case, the time period is 6 months or 180 days.
Discount rate = (RM31.25 / RM3750) x (360 / 180)
Discount rate = (0.008333) x 2
Discount rate = 0.01667 or 1.667%
Therefore, the discount rate charged is 1.667%.
To summarize:
i. The date of the note is 15 June 2020.
ii. The discount date is 15 October 2020.
iii. The bank discount amount charged is RM31.25.
iv. The discount rate charged is 1.667%.