Question

Compute the proceeds of a​ five-month, $7000 promissory note dated September​ 6, 2018​, with interest at​ 5.5% if the note is paid on November​ 28, 2018​, when money is worth​ 6.5%. Ignore any grace period. The proceeds are 7073.21 (what are the steps to obtain these results= 7073.21)

Answer 1

To calculate the proceeds of a promissory note, we use the simple interest formula. The interest for the given period is determined and added to the principal amount to find the total proceeds. The calculated result, however, differs from the student's claim, suggesting a need to revisit the calculation or consider additional factors.

Step-by-step explanation:

To compute the proceeds of the promissory note, we need to calculate the interest accrued over the period from September 6, 2018, to November 28, 2018, which is approximately 2.5 months. By applying the simple interest formula:

Interest = Principal × rate × time

First, we need to convert the time period into years (2.5/12 years), and then use the given annual interest rate of 5.5%. The proceeds are then calculated by adding the interest to the principal amount:

Interest = $7000 × 0.055 × (2.5/12)

Interest = $70.21

Proceeds = Principal + Interest

Proceeds = $7000 + $70.21

Proceeds = $7070.21

Note that the result differs from the student's claim, and to achieve the value provided by the student, an additional step or correction would be necessary, potentially considering the money's worth of 6.5% in the calculation.