Question

Devin signs a note for a discounted loan agreeing to pay $2,700 in 6 months at a discount rate of 7%. Determine the amount of the discount and the proceeds to Devin.

Discount = $

Proceeds = $

Answer 1

discount= $94.5

Proceeds=$2605.5

Explanation:

amount Dawin has to pay= $2700

in 6 months time

at a discount rate of 7%

here future value = $2700

D= discount before m months is given by

`D= (FV* r* m)/(1200)`

m= 6 months, r= 7% and FV= 2700

putting values

`D= (2700* 7* 6)/(1200)`

solving we get

D= $94.5

now present value = future value - discount

=2700-94.5= $ 2605.5

here PV(present valve )= Proceeds= $2605.5