A non-interest bearing promissory note has a $3100 maturity value and it matures in 90 days. You decide to sell the note 17 days before the legal due date. How much money do you sell it for if money is worth 5.15%?
A) $3029.58
B) $3209.58
C) $3092.58
D) $3058.92
E) $3222.58

Question

Quizplus · Accepted Answer

First, we need to calculate the discount period. The discount period is the period between the sale date and the legal due date, which is 73 days (90 days - 17 days).

Next, we can calculate the discount rate using the money worth formula:

Discount rate = (discount / face value) * (360 / days)

Where discount is the difference between the face value and the selling price, and days is the length of the discount period.

In this case, the face value is $3100 and the money is worth 5.15%, so the discount rate is:

Discount rate = (discount / $3100) * (360 / 73) = 5.15%

Solving for the discount, we get:

Discount = $3100 * 5.15% * (73 / 360) = $7.42

Finally, we can calculate the selling price:

Selling price = face value - discount = $3100 - $7.42 = $3092.58

Therefore, the best choice is C.

A Non-Interest Bearing Promissory Note Has a $3100 Maturity Value