On December 8, Sheffield Company discounted at Sunshine Bank a $7,500 (maturity value), 136-day note dated September 2. Sunshine’s discount rate was 8%. (Use Days in a year table.)

What proceeds did Sheffield Company receive?

Note: Use 360 days a year. Do not round intermediate calculations.



To determine the proceeds Sheffield Company received, we need to follow these steps:

1. **Calculate the number of days the note is outstanding at the bank.**

The note was dated September 2, and it was discounted on December 8. Since it is a 136-day note, we need to calculate how many days were remaining from December 8 until maturity.

- **Days from September 2 to December 8**:
    - September: $ 30 - 2 = 28 $ days (since the note starts on September 2)
    - October: 30 days
    - November: 30 days
    - December: 8 days
    - **Total days before discounting**: $ 28 + 30 + 30 + 8 = 96 $ days

So, there are $ 136 - 96 = 40 $ days remaining from December 8 until the maturity of the note.

2. **Calculate the bank discount.**

The bank discount is calculated using the formula:

\[
\text{Discount} = \text{Maturity Value} \times \text{Discount Rate} \times \frac{\text{Time (in days)}}{360}
\]

Where:
- Maturity Value = $7,500
- Discount Rate = 8% = 0.08
- Time = 40 days

Substitute the values into the formula:

\[
\text{Discount} = 7,500 \times 0.08 \times \frac{40}{360}
\]

\[
\text{Discount} = 7,500 \times 0.08 \times 0.1111 = 66.67
\]

3. **Calculate the proceeds.**

The proceeds Sheffield Company received are the maturity value minus the bank discount:

\[
\text{Proceeds} = 7,500 - 66.67 = 7,433.33
\]

So, the proceeds Sheffield Company received were **$7,433.33**.

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Would you like more details, or do you have any questions about this?

Here are some related questions:
1. What is the purpose of using 360 days in a year for financial calculations?
2. How does the discount rate affect the proceeds a company receives?
3. Why is it important to calculate the number of days remaining on a note when discounting it?
4. How would the proceeds change if the discount rate were higher?
5. What happens if a note is discounted earlier in its term?

**Tip:** The 360-day year method is often used in financial calculations because it simplifies interest and discount rate computations.

On December 8, Sheffield Company discounted at Sunshine Bank a $7,500 (maturity value), 136-day note dated September 2. Sunshine’s discount rate was 8%. (Use Days in a year table.) What proceeds did Sheffield Company receive? Note: Use 360 days a year. Do not round intermediate calculations.

Learn how to calculate the proceeds Sheffield Company received after discounting a $7,500 note with a 136-day term at 8% interest. Follow the step-by-step solution to understand financial math concepts like bank discount calculations and time-based interest rates. This guide is ideal for high school and college students studying finance.

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