i'm having trouble calculating this. can someone help please?
A $7,000, 4%, 120-day note, dated March 20, is discounted on July 15. Assuming a 3% discount rate, the bank discount is:
a) $1.74
b) $1.77
c) $7.11
d) $17.68
e) None of these
.
answer is b
. Solve for the unknown in the equation.
3x – 1 = 8
To calculate the bank discount for this note, we need to use the formula:
Bank Discount = Face Value of Note * Discount Rate * Time
First, let's calculate the time in terms of a year:
120 days = 120/365 = 0.3288 years
Now, we can substitute the values into the formula:
Bank Discount = $7,000 * 0.04 * 0.3288
Bank Discount = $91.224
Next, we need to find the bank discount using a 3% discount rate. We can use the formula again:
Bank Discount = Face Value of Note * Discount Rate * Time
Bank Discount = $7,000 * 0.03 * 0.3288
Bank Discount = $64.872
So, the bank discount for this note, assuming a 3% discount rate, is approximately $64.87.
However, none of the answer choices provided exactly match this amount, so the correct answer would be "e) None of these."
To calculate the bank discount, you need to use the following formula:
Bank Discount = Face Value * Discount Rate * Time
In this case, the Face Value is $7,000, the Discount Rate is 3%, and the Time is 120 days.
To find the Time in terms of years, you divide the number of days by 360 (assuming a 360-day year):
Time = 120 days / 360 days/year
Now, let's calculate the Time:
Time = 120 / 360 = 1/3 year
Now, let's plug in the values into the formula:
Bank Discount = $7,000 * 0.03 * (1/3)
Simplifying the equation:
Bank Discount = $7,000 * 0.01
Bank Discount = $70
So the bank discount is $70. However, the answer choices provided do not include $70. Therefore, the correct answer is e) None of these.
Note: The bank discount is not the same as the interest earned or charged on the note. It is simply the amount deducted from the face value of the note to calculate the net proceeds of the loan.