Question

Chang Co. issued a $51,000, 120-day, discounted note to Guarantee Bank. The discount rate is 11%. Assuming a 360-day year, the cash proceeds to Chang Co. are

A. $49,080
B. $51,000
C. $51,120
D. $47,920

Answer 1

The cash proceeds to Chang Co. can be calculated using the present value formula.

Step-by-step explanation:

To calculate the cash proceeds to Chang Co., we need to find the present value of the note. The formula to calculate the present value of a discounted note is:

Present Value = Face Value / (1 + (Discount Rate * Time))

Using this formula, the cash proceeds to Chang Co. can be calculated as follows:

Present Value = $51,000 / (1 + (0.11 * (120/360))) = $49,080

Therefore, the correct answer is A. $49,080.