Respuesta :
INFORMATION:
We have the following three situations:
1. face value =$12,000,
Rate=7%
Term 180 Days
2. Face value =6,000
Rate 4%
Term 90 Days
3. Face value=4,000
Rate=9%
Term 1 Year
And we must calculate Bank Discount (Interest), Proceeds, and Effective Rate
STEP BY STEP EXPLANATION:
1. Bank Discount:
To calculate it, we must use the following formula
[tex]\begin{gathered} Bank\text{ }discount=face\text{ }value\times rate\times time \\ Bank\text{ }discount=12000\times0.07\times\frac{180}{360} \\ Bank\text{ }discount=\text{ \$}420 \end{gathered}[/tex]Proceeds:
To calculate it, we must use the following formula
[tex]\begin{gathered} Proceeds=face\text{ }value-bank\text{ }discount \\ Proceeds=12000-420 \\ Proceeds=\text{ \$}11580 \end{gathered}[/tex]Effective Rate:
To calculate it, we must use the following formula
[tex]\begin{gathered} Effective\text{ }rate=\frac{interest}{proceeds\times time} \\ Effective\text{ }rate=\frac{420}{11580\times\frac{180}{360}} \\ Effective\text{ }rate=0.0725 \end{gathered}[/tex]2. Bank Discount:
Using the same formula from the last exercise
[tex]\begin{gathered} Bank\text{ }discount=6000\times0.04\times\frac{90}{360} \\ Bank\text{ }discount=\text{ \$}60 \end{gathered}[/tex]Proceeds:
Using the same formula from the last exercise
[tex]\begin{gathered} Proceeds=6000-60 \\ Proceeds=\text{ \$}5940 \end{gathered}[/tex]Effective Rate:
Using the same formula from the last exercise
[tex]\begin{gathered} Effective\text{ }rate=\frac{60}{5940\times\frac{90}{360}} \\ Effective\text{ }rate=0.0404 \end{gathered}[/tex]ANSWER:
1.
Bank discount = $420
Proceeds = $11580
Effective Rate = 0.0725
2.
Bank discount = $60
Proceeds = $5940
Effective Rate = 0.0404
