Proceeds from notes payable

On January 26, Nyree Co. borrowed cash from Conrad Bank by issuing a 30-day note with a face amount of $82,800. Assume 360 days in a year.

a.  Determine the proceeds of the note, assuming the note carries an interest rate of 10%.
fill in the blank 1 of 2
$

b.  Determine the proceeds of the note, assuming the note is discounted at 10%.
fill in the blank 2 of 2
$

To solve the problem, we calculate the proceeds for both cases:

### **Case a: Note with interest rate**
In this scenario, Nyree Co. borrows the full face amount of the note, and the interest is calculated separately. 

1. **Calculate the interest**:
   \[
   \text{Interest} = \text{Principal} \times \text{Rate} \times \frac{\text{Time}}{\text{Year}}
   \]
   \[
   \text{Interest} = 82,800 \times 0.10 \times \frac{30}{360} = 82,800 \times 0.10 \times 0.0833 = 691
   \]

2. **Determine proceeds**:
   Since the borrower receives the face amount in this scenario:
   \[
   \text{Proceeds} = \text{Face Amount} = 82,800
   \]

---

### **Case b: Discounted note**
In this case, the bank deducts the interest in advance from the face value, so the proceeds are the face amount minus the interest.

1. **Calculate the interest** (same formula as above):
   \[
   \text{Interest} = 691
   \]

2. **Determine proceeds**:
   \[
   \text{Proceeds} = \text{Face Amount} - \text{Interest}
   \]
   \[
   \text{Proceeds} = 82,800 - 691 = 82,109
   \]

---

### **Final Answers**:
a. Proceeds for note with interest rate: **\$82,800**

b. Proceeds for discounted note: **\$82,109**

Would you like further details or have additional questions?

---

### Relative Questions:
1. How is the interest calculated for different time periods and rates?
2. What is the difference between a discounted note and an ordinary note?
3. How do banks typically calculate discounts for loans?
4. What are the benefits of using discounted notes for the lender?
5. How does the time period affect the proceeds of a note?

**Tip**: When dealing with financial problems, carefully distinguish between proceeds (amount received) and face value (

On January 26, Nyree Co. borrowed cash from Conrad Bank by issuing a 30-day note with a face amount of $82,800. Assume 360 days in a year. a. Determine the proceeds of the note, assuming the note carries an interest rate of 10%. b. Determine the proceeds of the note, assuming the note is discounted at 10%.

Learn how to calculate proceeds from notes payable for Nyree Co., including scenarios with a 10% interest rate and a discounted note. This detailed solution involves simple interest and discounting concepts, providing step-by-step calculations for finance problems. Suitable for Grades 9-12.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation