Find the proceeds to the nearest cent when the following is discounted.
-Maturity value: $11,000 Discount period: 90 days
Discount rate: 10.6%
A)$9,934.00
B)$9,834.00
C)$10,712.49
D)$10,708.50

Question

Quizplus · Accepted Answer

Using the simple interest formula: 
Discount = Maturity Value x Rate x Time 
Where Rate is the discount rate and Time is the discount period in years (90 days is 0.25 years)

Discount = 11,000 x 0.106 x 0.25 
Discount = $292.50

Proceeds = Maturity Value - Discount 
Proceeds = 11,000 - 292.50 
Proceeds = $10,707.50

The closest answer to this amount is D) $10,708.50. To find the proceeds, we first need to find the discount amount:
Discount amount = Maturity value x Discount rate x Time
Time = 90/360 (since it is a 90-day discount period)
Discount amount = 11,000 x 0.106 x (90/360) = 289.50
Proceeds = Maturity value - Discount amount = 11,000 - 289.50 = $10,710.50
Rounding to the nearest cent gives us choice D as the correct answer: $10,708.50.

Find the Proceeds to the Nearest Cent When the Following