Question

Jack Cobb signed a simple discount note with a face value of $12000 at a discount rate of 14% for 7 months. Find the proceeds of the note and the effective interest rate

Answer 1

Proceeds = $11020

Effective interest rate = 15.2%

To find the proceeds of the note, we will subtract the bank discount from the face value

`Discount=12000*0.14*(7)/(12)=980`
`\text{Proceeds}=12000-980=11020`
`R=(I)/(PT)`
`R=(980)/((11020)((7)/(12)))`
`R=0.15245=15.2\%`