Question

Mel Sturbridge needs $24,700 to remodel his home. Find the face value of a simple discount note that will provide the $24,700 in proceeds if he plans to repay the note in 180 days and the bank charges an 8% discount rate. Round to the nearest cent.

Answer 1

Discount rate, d = 8% = 0.08 No. of days = 180 i.e. n = 180/365 , PV = 24,700, PV = C(1 - nd) , 24700 = C(1 - (180/365)*0.08) i.e. 24700 = 0.96055C i.e. C = 25714.43