Question

Using ordinary interest, calculate the missing information for the following simple discount

Answer 1

The Bank discount and proceeds of the given information is:

$2365.27 and $47634.73 respectively.

Given the face value is $50,000

Discount rate = 13%

No.of term days = April 5 to August 14

= 131 days.

Bank discount = ?

Proceeds = ?

First calculate the bank discount using the formula:

Bank discount = face value × discount rate × time

Bank discount = $50,000 × 0.13 × 131/360

= 50,000×0.13×0.36388

= $2365.27

now calculate the proceeds using the formula :

Proceeds = face value - bank discount

= 50,000 - 2365.27

= $47634.73

Hence the bank discount and proceeds are $2365.27 and $47634.73 respectively.

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