Question

A man holds a note of ​$6,000 that has an interest rate of 11​% annually. The note was made on March 17 and is due November 14. He sells the note to a bank on June 13 at a discount rate of 10​% annually. Find the proceeds on the​ third-party discount note.​ (Use the​ banker's rule.)

Answer 1

The value of the proceeds on the third party discount note for the specified condition is $5968.28

How to calculate proceeds?

Proceeds is the difference between maturity value of the original rate and the third party discounts. Or,

Proceeds = Maturity value of the original rate - Third party discounts

How to calculate the maturity value of the original rate?

Let we take:

• P = principal amount on which interest will be applied.
• R = interest rate
• T= time period for which interest will be applied,

Then we get:

Maturity value = P(1 + RT) (use decimal value of R instead of percent. For that, divide the percentage value by 100 to convert it to decimal (if its in percent) ).

How to calculate the third party discounts?

Third party discount is the multiplication result of the maturity value of the original rate to the rate of interest and time period.

Thus, we get:

Third party discount = Maturity value × R × T (R in decimal form).

For this case, we're specified that:

• P = principal amount on which interest will be applied = $6000
• Rate of interest = R = 11% = 0.11 (in decimal form) (annually)
• Time = from 17th march till 14th november.

Using banker's rule (which assumes 360 day year with 30 day months), we get:

Number of days from 17th march till 14th november = number of days from 17th march till 16th november - 2 = $8 \times 30 - 2 = 238$ (as there are 8 months in between, all of assumingly 30 days)

Converting this to year, we get:

$T = \dfrac{238}{360} \approx 0.661$ years.

Thus, we get:

Maturity value = $P(1 + RT) \approx 6000 (1 + 0.11 \times 0.661) = 6436.26 \: \rm dollars$

And therefore, we get:

Third party discount =  Maturity value × R × T = $6436.26 \times 0.11 \times 0.661 \approx 467.98 \: \rm dollars$

Thus, the value of the proceeds on the third-party discount is:

maturity value - third party proceeds = $6436.26 - 467.98 = 5968.28 \: \rm dollars$

Thus, the value of the proceeds on the third party discount note for the specified condition is $5968.28

Learn more about proceeds here:

https://brainly.com/question/23530628

#SPJ1