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Homework answers / question archive / Trake Inc received a $150,000 bank discount note for 6 months at 5% simple discount After 2 months, Trake Inc decided to sell the note to the bank how much proceeds did Trake Inc get from the sale of this note?
Trake Inc received a $150,000 bank discount note for 6 months at 5% simple discount After 2 months, Trake Inc decided to sell the note to the bank how much proceeds did Trake Inc get from the sale of this note?
Answer: $151,187.5
Solution
Step 1: Compute for the Maturity Value
[150,000] + [$150,000 x 5% x 6/12]
150,000 + 3,750
Maturity Value = $153,750
Step 2: Compute for the amount of discount using the Maturity Value
[$153,750 x 5% x 4/12 =2,562.5]
Discount = 2,562.5
Step 3: Compute for the Cash Proceeds
Maturity Value $153,750
less: Discount (2,562.5)
Cash Proceeds $151,187.5
