Ron bought goods from shelly katz. On may 8, shelly gave ron a time extension on his bill by accepting a $3000, 8%, 180 day note. On august 16, shelly discounted the note at Roseville bank at 9% what proceeds does shelly rerceive?
To calculate the proceeds that Shelly receives after discounting the note at the bank, we need to follow these steps:
Step 1: Calculate the interest earned on the note from May 8 to August 16.
- First, calculate the number of days between May 8 and August 16:
Number of days = August 16 - May 8 = 100 days
- Next, calculate the interest earned using the simple interest formula:
Interest = Principal * Rate * Time
Principal = $3000
Rate = 8% expressed as a decimal = 0.08
Time = 100 days / 360 days (assuming a 360-day calendar)
Interest = $3000 * 0.08 * (100/360) = $66.67
Step 2: Calculate the maturity value of the note.
- Maturity value = Principal + Interest earned
- Maturity value = $3000 + $66.67 = $3066.67
Step 3: Calculate the discount received by Shelly when she sells the note to the bank.
- Discount = Maturity value * Discount rate
- Discount rate = 9% expressed as a decimal = 0.09
- Discount = $3066.67 * 0.09 = $276.00
Step 4: Calculate the proceeds received by Shelly.
- Proceeds = Maturity value - Discount
- Proceeds = $3066.67 - $276.00 = $2790.67
Therefore, Shelly receives $2790.67 as the proceeds after discounting the note at the bank.