Varsity Press, a publisher of college textbooks, received a $70,000 promissory note at 12% ordinary interest for 60 days from one of its customers, Reader’s Choice Bookstores. After 20 days, Varsity Press discounted the note at the Grove Isle Bank at a discount rate of 14.5%. The note was made on March 21. What was the maturity date of the note?

Question

Varsity Press, a publisher of college textbooks, received a $70,000 promissory note at 12% ordinary interest for 60 days from one of its customers, Reader’s Choice Bookstores. After 20 days, Varsity Press discounted the note at the Grove Isle Bank at a discount rate of 14.5%. The note was made on March 21. What was the maturity date of the note?

Iknow this is May 20th.
I am really lost on the next three.

Using the scenario from the previous question, calculate the maturity value of the note.

What was the discount date of the note from the previous question?

What proceeds did Varsity Press receive after discounting the note?

Answer 1

To find the maturity date of the note, we need to determine the length of the term in days. The note was made on March 21, and the question states that after 20 days, Varsity Press discounted the note. This means that the discount date is 20 days from March 21.

To calculate the maturity date, we add 60 days to the discount date. Let's break it down step by step:

1. Discount date: March 21 + 20 days = April 10

2. Maturity date: Discount date (April 10) + 60 days = May 30

So, the maturity date of the note is May 30.

Now let's move on to the next questions:

1. To calculate the maturity value of the note, we need to determine the interest earned for the term. The formula for calculating interest is: Interest = Principal * Rate * Time.

Principal = $70,000
Rate = 12% (expressed as a decimal, 0.12)
Time = 60 days

Maturity value = Principal + Interest
Maturity value = Principal + (Principal * Rate * Time)

Maturity value = $70,000 + ($70,000 * 0.12 * 60)

2. To find the discount date of the note, we already determined that it is April 10.

3. To calculate the proceeds Varsity Press received after discounting the note, we need to find the discount amount. The discount amount is determined by multiplying the note's face value (principal) by the discount rate.

Principal = $70,000
Discount rate = 14.5% (expressed as a decimal, 0.145)

Discount amount = Principal * Discount rate
Discount amount = $70,000 * 0.145

Proceeds = Principal - Discount amount
Proceeds = $70,000 - (discount amount calculated above)

I would need the discount amount to provide the exact proceeds Varsity Press received after discounting the note.