Are you good with Business Math? Please help.?

Question

use ordinary Interest as needed.

1) Bernie Hercher borrowed 8,000 for 180 days from Lion bank. The bank discountedd a note at 5%. What Proceeds does Bernie receive? And, Calculate the effective rate to the nearest hundredth percent.

2) Ron Prentice bought goods fro mShelly Katz. On May 8th Shelly gave Ron a time extension on his bill by accepting a 3,000, 8%, 180 day note. On August 16, Shelly dicounted the note at the bank at 9%. what proceeds does shelly katz receive?

3) On May 12, Scott Rinse accepted 8,000, 12%, 90 day note for a time extension of a bill for goods bought by Ron Prentice. On June 12 Scott discounted the note at Able bank at 10%What proceeds does scott receive?

Answer 1

1) if Bernie is borrowing 8,000 for 180 days by a discount note with discount d then he is actually borrowing some amount 8,000D where D=(1-dt) and he repays 8,000 to the bank after the term of t years expires

Since the term is 180 days and (presuming the year to be 360 days) the discount rate is dt=5%/2 = 2.5% for the 180 day term. and

So his proceeds are 8000(1-0.025) = 7,800

The effective rate is 8000/7800 - 1 semiannualy or 0.2564%

At an annual rate this is 1.02564^2 - 1 = 0.05194 or 5.19%

2) For 180 days the discount rate is dt=9%/2 = 4.5% so the proceeds are 3,000*(1-0.045) = 2865.

3) This time it is a 90 day note so the discount rate is divided by 4 instead of 2 so the proceeds are

8000(1-0.1/4) = 8000(1-0.025) = 7800 as in problem 1

Answer 2

Shelly Katz