Question

Karim Darmati holds a note of $7,000 that has a discount rate of 14%. The note was made on March 8 and is due October 19. Karim sells the note to First City Bank on July 16 at a discount rate of 10%. Find the proceeds to Karim.

Be sure to change the date worksheet to a 360-day year before calculating number of days. Round your answer to the nearest whole dollar.

Answer 1

It appears as though the "proceeds to Karim" would be the value of the discounted note on July 16. The maturity date is 3 months and 3 days hence, so the proceeds would be
.. P*(1 -rt) = $7000*(1 -0.10*(93/360)) ≈ $6819