Question

43. Ford Davis borrowed $14,000 of a non-interest-bearing, simple discount, 8% , 90-day note. Assume ordinary interest. What are Ford's proceeds?

A. $14,000
B. $13,720
C. $13,000
D. $17,320

Answer 1

Answer: B. $13,720

Step-by-step explanation: To calculate Ford's proceeds, we need to first find the discount, which is equal to the interest on the loan multiplied by the principal amount of the loan. The interest is 8% of $14,000, or $1,120. The discount is then $1,120 * 90/360, or $310. The proceeds are equal to the principal amount minus the discount, or $14,000 - $310 = $13,720.