Question

2. Lori Koetters was looking at different simple discount notes available to her. She found a note that would cost her $125 in interest at 8% for 90 days. What was the face value?

Answer 1

$6336.81

Explanation:

Given:

• Expected cost of the simple discount note = $125

,

• Rate, r = 8%

,

• Time = 90 days = 90/365 year

We want to find the face value (or principal).

Using the simple interest formula:

`\text{ Simple Interest}=(Principal* Rate* Time)/(100)`

Substitute the given values:

`125=(P*8*(90)/(365))/(100)`

Then solve for the value of P:

`\begin{gathered} 125=(P*8*(90)/(365))/(100) \\ \text{Cross multiply} \\ 125*100=P*8*(90)/(365) \\ Divide\text{ both sides by }8*(90)/(365) \\ P=(125*100)/(8*(90)/(365)) \\ P=\$6336.81 \end{gathered}`

The face value of the note is $6336.81.