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

To calculate the proceeds Ford will receive from this simple discount note, we’ll follow these steps:

1. **Identify the Given Information:**
   - Face value of the note, $ F = 14,000 $
   - Discount rate, $ d = 8\% $
   - Time period in days, $ t = 90 $ days
   - Use **ordinary interest**, so we assume a 360-day year for calculations.

2. **Calculate the Bank Discount:**
   The bank discount, $ D $, can be calculated using the formula:
   \[
   D = F \times d \times \frac{t}{360}
   \]
   Substituting the values:
   \[
   D = 14,000 \times 0.08 \times \frac{90}{360}
   \]
   Simplify inside the fraction:
   \[
   D = 14,000 \times 0.08 \times 0.25
   \]
   \[
   D = 14,000 \times 0.02 = 280
   \]
   So, the discount amount $ D $ is **$280**.

3. **Calculate the Proceeds:**
   The proceeds $ P $ Ford receives is the face value minus the discount:
   \[
   P = F - D
   \]
   Substituting the values:
   \[
   P = 14,000 - 280
   \]
   \[
   P = 13,720
   \]

Therefore, Ford’s proceeds are **$13,720**.

---

Would you like further clarification on this process?

Here are five related questions you might find helpful:
1. What is the difference between a simple discount note and a simple interest note?
2. How would the proceeds change if the discount rate were 10% instead of 8%?
3. How does the ordinary interest method (360-day year) affect the calculation compared to the exact interest method (365-day year)?
4. How would the proceeds differ if the note were for 180 days instead of 90 days?
5. What are the real-world applications of simple discount notes for businesses?

**Tip:** For a quick estimate of proceeds on a discounted note, multiply the face value by (1 - discount rate × time/360).

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

Discover how to calculate the proceeds on a $14,000 simple discount note with an 8% rate over 90 days using the ordinary interest method. This guide covers key concepts in financial mathematics, including the bank discount and proceeds formulas, and is ideal for Grades 11-12.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation