Question

Ada signed a simple discount promissory note for $5,500. the discount rate is 12%, and the term of the note is 5 months. what are ada's proceeds on the loan?

Answer 1

Given that, Promissory note A = 5,500 Discount rate i = 12% i = 12/100 Term n= 5 months we know that, 1 year = 12 months 5 months= 5/12 So we get, A = 5,500 i = 12/100 n= 5/12 To find the ada's proceeds on the loan formula is, Proceeds=A(1+i)^n ........... (1) Put the value of A,i,n in equ (1) Proceeds=5500(1+12/100)^5/12 =5500(1+0.12)^0.417 =5500(1.12)^0.41667 =5500(1.04835) Proceeds=5765.94 Therefore $5765.94 Proceeds on the loan