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?

Finance Oct 30, 2021

Expert Solution

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

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