Ada signed a simple discount promissory note for $5,500. The discount rate is 12%, and the term of the note is 5 months. What are Ada's proceeds on the loan?
A) $4,623
B) $5,225
C) $5,015
D) $4,515

Question

Quizplus · Accepted Answer

The proceeds on the loan can be calculated by subtracting the discount from the face value of the note. The discount is calculated as: $ \text{Discount} = \text{Principal} \times \text{Rate} \times \text{Time} $, where the time is in years. For Ada's loan: $ \text{Discount} = \$5,500 \times 12\% \times \frac{5}{12} = \$275 $. Therefore, the proceeds are: $ \$5,500 - \$275 = \$5,225 $.

Ada Signed a Simple Discount Promissory Note for $5,500