Question

Abe Corp. discounted a 120-day note with a maturity value of $8,000 dated June 8 at the Village Bank on Sept. 2, at a discount rate of 9%. Use ordinary interest. How much did Abe receive?

Answer 1

Abe Corp. discounted a 120-day $8,000 note at a 9% discount rate and received $7,932 after calculating ordinary interest for 34 days remaining until the note's maturity.

Step-by-step explanation:

The student asked how much Abe Corp. received for a discounted note. Abe Corp. discounted a 120-day note for $8,000 on June 8 and took it to the Village Bank on September 2 with a discount rate of 9%. To calculate the discount amount using ordinary interest (assuming a 360-day year), the following steps should be followed:

1. Calculate the number of days until maturity from the discount date: Sep 2 to Oct 6 (maturity date) is 34 days.
2. Calculate the ordinary interest: ($8,000) × (9% annual rate) × (34/360 days) = $68.
3. Subtract the interest from the maturity value to find the proceeds: $8,000 - $68 = $7,932.

Therefore, the amount received by Abe Corp. would be $7,932.

Note that in actual practice, additional fees might be deducted by the bank when discounting the note, which are not considered in this calculation.

Answer 2

Abe receive = $ 7767

Step-by-step explanation:

Abe receive = (maturity Value)/(1+ discount rate*120/360)

Abe receive = 8000/(1+ 9%*120/360)

Abe receive = $ 7767