Mountain Site discounts a customer's 12%,$6,000,90-day note dated July 1,on August The discount period is 45 days,and the bank discount rate is 18%.The maturity value of the note is $6,180.The bank discount is $139.The proceeds of the note are:
A)$6,041.
B)$6,319.
C)$5,861.
D)$6,139.

Question

Quizplus · Accepted Answer

The proceeds of the note are the face amount minus the bank discount. The bank discount is calculated as the face amount multiplied by the discount rate multiplied by the fraction of the year that the note is outstanding. In this case, the face amount is $6,000, the discount rate is 18%, and the note is outstanding for 45 days, which is 45/360 of a year. Therefore, the bank discount is $6,000 * 0.18 * 45/360 = $139. The proceeds of the note are therefore $6,000 - $139 = $5,861.

Mountain Site Discounts a Customer's 12%,$6,000,90-Day Note Dated July 1,on