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Exam 11: Promissory Notes, Simple Discount Notes, and the Discount Process

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Question 41

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The maturity value of a non-interest-bearing note is the same as its face value.

A) True
B) False

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Question 42

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Proceeds from discounting an interest-bearing note is the principal minus the bank discount.

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B) False

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Question 43

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A promissory note:

Use ordinary interest: $\begin{array} { | l | l | l | l | l | l | l | l | } \hline & \text { Rate of } & & \text { Maturity } & \text { Date Note } & \text { Date Note } & \text { Discount } & \\ \text { Principal } & \text { Interest } & \text { Time } & \text { Value } & \text { Made } & \text { Discounted } & \text { Period } & \text { Proceeds } \\\hline \$ 18,000 & 8 \% & 120 \text { days } & \text { A } & \text { June } 9 & \text { Sept } 6 & \text { B } & \text { C } \\\hline\end{array}$ Note to be discounted at 10%

Calculate the maturity value for a note at $51,000 for 62 days at 9%.

Tiffany purchased a $10,000, 13-week Treasury bill that is paying 2.25%. What is the effective rate on this T-bill? (round to the nearest hundredth of a percent)

The maturity value of a $16,000 non-interest-bearing, simple discount 6%, 60-day note is:

All interest-bearing notes must have the rate stated on the note.

On April 12, Dr. Rowan accepted a $10,000, 60-day, 11% note from Bill Moss granting a time extension on a past-due account. Dr. Rowan discounted the note at the bank at 12% on May 13. The bank discount is:

Calculate the maturity value for a note at $61,000 for 62 days at 5% (use 360).

Calculate the maturity value for an interest-bearing note of $28,500 for 118 days at 8%.

The face value of a simple discount note is $4,000. The bank discount is calculated at 12% for 60 days. Use ordinary interest. Calculate: A. Amount of interest charged for note B. Amount borrower would receive C. Amount payee would receive at maturity D. Effective rate (round to the nearest hundredth of a percent)

If one discounts a non-interest-bearing note, all the following will be used except:

On May 12, Bob Campbell accepted a $5,000 note in granting a time extension of a bill for goods bought by Rick Ween. Terms of the note were 8% for 120 days. On July 8, Bob needed to raise cash and discounted the note at Rick's bank at a discount rate of 9%. Calculate Bob's proceeds. Use ordinary interest.

The effective rate of a $30,000 non-interest-bearing simple discount 5%, 60-day note is:

On May 1, the Morse Company accepted a 60-day, $15,000 non-interest-bearing note from U Corporation. What is the maturity value of the note?

The maturity value of an interest-bearing note is principal minus interest.

The discount period represents the exact number of days the bank will have to wait for the note to come due.

Mobilee Oil Company accepted a $10,000, 120-day note dated March 3 at 8½% to settle a past-due account receivable. Mobilee Oil discounted the note to raise cash on May 10, at a discounted rate of 9%. What proceeds did Mobilee Oil receive? Use ordinary interest.

Molly Lenny bought a $10,000 13-week Treasury bill at 13%. What is her effective rate? Use ordinary interest. Round to nearest hundredth percent.