Question

Aster corporation accepted a $20,000, 9 percent 120-day note dated august 25 from lee company in settlement of a past bill. On October 25, Aster Corporation decided to discount the note at a discount of 8 percent. The proceeds to Aster Corporation are (blank)

Answer 1

$20, 533.33

Explanation:

From the question, we are given the following values

Principal = $20000

Rate = 8% = 0.08

Time( in years) = 120days = 4 months = 4/12 years = 1/3 years

Interest = Principal × Rate × Time

Interest = 20,000 × 0.08× (1/4)

Interest = $533.33

Hence, the proceeds to Aster Corporation are

$20000 + $533.33

= $20,533.33