Question

Calculate Bank Discount (Interest), Proceeds, and Effective RateC. Face value =$4,000Rate=9%Term=1 Year

Answer 1

c.

Bank discount:

`Bank\text{ }Discount=4000*(9)/(100)*1year`

As the time is in years you don't need to divide the dime into 360

`Bank\text{ }discount=4000*0.09*1=360`

Bank discount: $360

Proceeds:

`Proceeds=4000-360=3640`

Proceesds: $3640

Effective rate:

`Effective\text{ }rate=(360)/((3640*1))=(360)/(3640)=0.0989`

Effective rate: 0.0989