Ron Prentice bought goods from Shelly Katz. On May 26, Shelly gave Ron a time extension on his bill by accepting a $3,500, 8.80%, 150-day note. On August 31, Shelly discounted the note at Roseville Bank at 9.80%. (Use Days in a year table.)
What proceeds does Shelly Katz receive? (Use 360 days a year
To determine the proceeds that Shelly Katz receives from discounting the note, we need to calculate the discount amount and subtract it from the face value of the note.
First, let's calculate the discount amount:
Discount amount = Face value of the note * Discount rate * Time
Time = Number of days from August 31 to May 26 = 97 days (August has 31 days, May has 31 days, and June, July have 30 days each)
Discount rate = 9.80% = 0.098
Face value of the note = $3,500
Discount amount = $3,500 * 0.098 * (97/360) [Note: we divide by 360 to adjust for using a 360-day year]
Discount amount ≈ $93.36
Next, let's calculate the proceeds:
Proceeds = Face value of the note - Discount amount
Proceeds = $3,500 - $93.36
Proceeds ≈ $3,406.64
Therefore, Shelly Katz would receive approximately $3,406.64 as proceeds from discounting the note at Roseville Bank.