Question

Anderson Co. issued a $50,000, 60-day, discounted note to National Bank. The discount rate is 6%. At maturity, assuming a 360-day year, the borrower will pay

a) $50,500
b) $50,000
c) $53,000
d) $49,500

Answer 1

The borrower will pay d) $49,500 at maturity.

Step-by-step explanation:

The borrower will pay an amount of $49,500 at maturity.

To calculate the amount, we first multiply the face value of the note ($50,000) by the discount rate (6% = 0.06) and then multiply by the time in years (60 days / 360 days = 1/6).
Discount = $50,000 x 0.06 x (1/6) = $500

The amount to be paid at maturity is the face value of the note minus the discount: $50,000 - $500 = $49,500.