On May 12, Scott Rinse accepted an $8000, 12%, 90-day note for a time extension of a bill for goods bought by Ron Prentioce. On June 12, Scott discounted the note at Able Bank at 10%. What proceeds does Scott receive?
Well, it looks like Scott's in quite the financial circus! Let's break down the numbers and calculate it.
The face value of the note is $8000, and it carries an interest rate of 12%. Since the note has a 90-day term, that means it will accrue interest for 90 days.
Now, let's calculate the interest on the note. We use the formula: Interest = Principal * Rate * Time.
Interest = $8000 * 12% * (90/365) = $295.89.
So, the total amount due on the note (including the interest) will be $8000 + $295.89 = $8295.89.
Now, let's move on to the discounting part. Scott decides to discount the note at Able Bank, which offers a 10% discount rate. This means that Scott will receive the discounted value of the note, which is lower than its face value.
The formula to calculate the discounted value is: Discounted Value = Face Value * (1 - Discount Rate).
Discounted Value = $8295.89 * (1 - 10%) = $7466.31.
Therefore, Scott will receive proceeds of $7466.31 when he discounts the note at Able Bank.
And hey, Scott might not be a financial juggler, but at least he managed to get some money out of this whole situation!
To calculate the proceeds that Scott receives when he discounts the note at Able Bank at 10%, we need to follow these steps:
Step 1: Calculate the interest on the note.
Interest = Principal (P) x Rate (r) x Time (t)
P = $8000
r = 12%
t = 90 days/365 days (assuming a 365-day year)
Interest = $8000 x 0.12 x (90/365)
Interest = $235.07
Step 2: Calculate the maturity value of the note.
Maturity Value = Principal (P) + Interest
Maturity Value = $8000 + $235.07
Maturity Value = $8235.07
Step 3: Calculate the discounted value at Able Bank.
Discounted Value = Maturity Value / (1 + Discount Rate x Time)
Discount Rate = 10%
Time = 30 days/365 days (assuming a 365-day year)
Discounted Value = $8235.07 / (1 + 0.1 x (30/365))
Discounted Value = $8100.34
Therefore, Scott receives $8100.34 as proceeds when he discounts the note at Able Bank.
To calculate the proceeds received by Scott Rinse when he discounts the note at Able Bank, we need to calculate the discounted value of the note.
The formula to calculate the discounted value of a note is:
Discounted Value = Face Value * (1 - Discount Rate * Time)
Where:
Face Value = $8000 (the original amount of the note)
Discount Rate = 10% (the discount rate at Able Bank)
Time = 90 days / 360 days (since banks typically use a 360-day year for calculations)
First, calculate the Time:
Time = 90 days / 360 days = 0.25
Next, substitute the values into the formula:
Discounted Value = $8000 * (1 - 0.10 * 0.25)
Discounted Value = $8000 * (1 - 0.025)
Discounted Value = $8000 * 0.975
Discounted Value = $7800
Therefore, Scott Rinse will receive $7800 as the proceeds when he discounts the note at Able Bank.