Question

assuming a 360-day year, proceeds of $43,136 were received from discounting a $44,356, 90-day note at a bank. the discount rate used by the bank in computing the proceeds was

Answer 1

The discount rate used by the bank in computing the proceeds is approximately 5.94%.

Step-by-step explanation:

To find the discount rate used by the bank in computing the proceeds, we can use the formula for present value:

Present Value = Future Value / (1 + Discount Rate)^n

In this case, the future value is $44,356, the present value is $43,136, and the time period is 90 days (which is equivalent to 90/360 = 0.25 years).

Plugging in the values into the formula, we get:

$43,136 = $44,356 / (1 + Discount Rate)^0.25

Multiplying both sides by (1 + Discount Rate)^0.25, we get:

(1 + Discount Rate)^0.25 = $44,356 / $43,136

Taking the fourth root of both sides, we get:

1 + Discount Rate = ($44,356 / $43,136)^(1/0.25)

Subtracting 1 from both sides, we get:

Discount Rate = ($44,356 / $43,136)^(1/0.25) - 1

Using a calculator to compute the value, we find that the discount rate used by the bank is approximately 0.0594 (or 5.94%).