Ch.11 Promissory & Discount Notes Verified Test Bank 13e - Business Math Procedures 13e Test Bank with Answers by Jeffrey Slater. DOCX document preview.
Practical Business Math Procedures, 13e (Slater)
Chapter 11 Promissory Notes, Simple Discount Notes, and the Discount Process
1) A promissory note is always an oral promise.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
2) The principal of a promissory note is the face value.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
3) The payee of a promissory note is extending the credit.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
4) The rate on a promissory note is always stated as a semiannual rate.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
5) The maker of a promissory note issues the note.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
6) The maturity date of a promissory note represents when only the principal is due.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
7) A Treasury bill must be 13 weeks.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (4) Explain and calculate the effective rate for a Treasury bill.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
8) All interest-bearing notes must have the rate stated on the note.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
9) The maturity value of a non-interest-bearing note is the same as its face value.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
10) Banks can never deduct interest in advance on a loan.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
11) A simple discount note does not involve a bank discount.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
12) Proceeds of a simple discount note equals amount borrowed minus bank discount.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
13) Bank discount on a simple discount note is based on the amount a borrower receives and not what he or she pays back.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
14) A simple discount note results in a higher interest rate (effective rate) than a simple interest note.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
15) The purchase price (or proceeds) of a Treasury bill would be the value of the Treasury bill plus the discount.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (4) Explain and calculate the effective rate for a Treasury bill.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
16) An interest-bearing note can be discounted before the maturity date.
Difficulty: 1 Easy
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
17) The maturity value of an interest-bearing note is principal minus interest.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
18) The discount period represents the exact number of days the bank will have to wait for the note to come due.
Difficulty: 1 Easy
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
19) The calculation of the bank discount when discounting an interest-bearing note uses maturity value.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
20) Proceeds from discounting an interest-bearing note is the principal minus the bank discount.
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
21) Lines of credit provide companies with additional financing that is immediately available to them.
Difficulty: 1 Easy
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
22) A promissory note:
A) Is an oral promise
B) Is a conditional promise
C) Has a fixed time
D) Has a variable time in the future to be paid
E) None of these
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
23) The maker of a promissory note:
A) Issues the note
B) Never borrows the money
C) Extends the credit
D) Issues the note and extends credit
E) None of these
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
24) Maturity value of a non-interest-bearing note is:
A) Less than face value
B) Sometimes equal to face value
C) Greater than face value
D) Same as the face value
E) None of these
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
25) A simple discount note results in:
A) Lower interest costs than a simple interest note
B) Same interest costs as a simple interest note
C) Interest deducted when note is paid back
D) Interest deducted in advance
E) None of these
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
26) The maturity value of a $16,000 non-interest-bearing, simple discount 6%, 60-day note is:
A) $16,160
B) $16,000
C) $16,610
D) $16,600
E) None of these
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
27) The bank discount of an $18,000 non-interest-bearing, simple discount 8%, 90-day note is:
A) $18,360
B) $17,640
C) $630
D) $360
E) None of these
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
28) The effective rate of a $30,000 non-interest-bearing simple discount 5%, 60-day note is:
A) 5.0%
B) 5.04%
C) 6.0%
D) 5.14%
E) None of these
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
29) The effective rate of a $25,000 non-interest-bearing simple discount 10%, 90-day note is (round to the nearest hundredth of a percent):
A) 10.62%
B) 10.0%
C) 10.8%
D) 10.26%
E) None of these
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
30) The maturity value of an interest-bearing note is:
A) Principal - interest
B) Principal + proceeds
C) Principal + interest
D) Principal - bank discount
E) None of these
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
31) In discounting an interest-bearing note, the discount period represents:
A) Maturity date
B) Date of original note
C) Number of days from date of discount to date of maturity
D) Number of days from date of original note to date of maturity
E) None of these
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
32) In calculating the bank discount when discounting an interest-bearing note, which one of the following is not used in the calculation?
A) Principal proceeds
B) Maturity value
C) Bank discount rate
D) Discount period
E) None of these
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
33) If one discounts a non-interest-bearing note, all the following will be used except:
A) Principal + interest
B) Discount rate
C) Discount period
D) Face value of the note
E) None of these
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
34) A $7,000, 4%, 120-day note dated March 20, is discounted on July 15. Assuming a 3% discount rate, the bank discount is:
A) $1.74
B) $1.77
C) $7.11
D) $17.68
E) None of these
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
35) A $15,000, 11%, 120-day note dated Sept. 3, is discounted on Nov. 11. Assuming a bank discount rate of 9%, the proceeds would be:
A) $15,550.00
B) $15,351.74
C) $15,531.74
D) $15,135.47
E) None of these
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
36) A $120,000, 5%, 200-day note dated June 6, is discounted on October 8. The discount period is:
A) 124 days
B) 76 days
C) 142 days
D) 67 days
E) None of these
Difficulty: 2 Medium
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
37) A $15,000, 6%, 50-day note dated November 8, is discounted at 5% on November 28. The proceeds of the note would be:
A) $14,936.46
B) $15,610.64
C) $63.54
D) $15,061.98
E) None of these
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
38) A $25,000, 15%, 80-day note dated November 5, is discounted at National Bank on January 5. The discount period is:
A) 80 days
B) 19 days
C) 61 days
D) 91 days
E) None of these
Difficulty: 2 Medium
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
39) The maturity value of a $20,000, 7%, 75-day interest-bearing note is:
A) $22,912.67
B) $20,291.67
C) $21,029.67
D) $22,219.76
E) None of these
Difficulty: 2 Medium
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
40) J. Ryan discounts an 80-day note for $15,000 at 12%. The bank discount is (assume ordinary interest):
A) $14,600
B) $15,400
C) $400
D) $15,000
E) None of these
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
41) B. Blue discounts a 90-day note for $20,000 at 4%. The bank discount is (assume ordinary interest):
A) $20,200
B) $19,800
C) $200
D) $2,000
E) None of these
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
42) Jay discounts a 100-day note for $25,000 at 13%. The effective rate of interest to the nearest hundredth percent is:
A) 13.48%
B) 13.49%
C) 13.02%
D) 13.03%
E) None of these
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
43) Jill Corporation accepted a $16,000 note on Aug. 12. Terms of the note were 13% for 100 days. Jill discounted the note on September 28, at the Reno Bank at 14%. The proceeds to Jill would be:
A) $341.69
B) $16,236.09
C) $303.00
D) $16,277.78
E) None of these
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
44) Jill Jones borrowed $18,000 for 180 days from Sovereign Bank. The bank discounts the note at 8%. The effective interest rate to the nearest hundredth percent is:
A) 8.33%
B) 8.32%
C) 8.23%
D) 8.31%
E) None of these
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
45) On March 12, Bill Jones accepted a $12,000 note in granting a time extension of a bill for goods purchased by Ron Prentice. Terms of the note were 13% for 90 days. On April 24, Bill could no longer wait for the money and discounted the note at Able Bank at a discount rate of 14%. The proceeds to Bill are:
A) $12,047.90
B) $12,163.54
C) $12,390.00
D) $12,048.90
E) None of these
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
46) Ray Furniture wants to buy a dining room set for $7,000 with a 20% trade discount. Ray needs the cash to pay the bill and is considering discounting a 90-day note dated May 12, with a maturity value of $6,500 at Hunt Bank at a discount rate of 13% on June 5. The bank discount if Ray discounts the note is:
A) $211.25
B) $1,400.00
C) $154.92
D) $212.15
E) None of these
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
47) On June 30, Rose Company accepted a 90-day, $12,000 non-interest-bearing note from C Manufacturer. The maturity value of the note for Rose is:
A) $11,500
B) $11,800
C) $11,900
D) $11,950
E) None of these
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
48) Shelley Corporation discounted a $7,000, 90-day note dated June 18, at the Sunshine Bank on July 18 at a discount rate of 12%. (Assume the $7,000 is the maturity value.) The amount of bank discount is:
A) $70
B) $210
C) $140
D) $240
E) None of these
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
49) Ralph Corporation accepted a $15,000, 11%, 120-day note dated August 19, from Jay Company in settlement of a past bill. On October 20, Ralph Corporation decided to discount the note at a discount rate of 12%. The proceeds to Ralph Corporation are:
A) $1,517.97
B) $1,517.79
C) $15,249.73
D) $15,249.37
E) None of these
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
50) On April 12, Dr. Rowan accepted a $10,000, 60-day, 11% note from Bill Moss granting a time extension on a past-due account. Dr. Rowan discounted the note at the bank at 12% on May 13. The bank discount is:
A) $98.44
B) $111.94
C) $94.48
D) $111.49
E) None of these
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
51) An 8% 13-week Treasury bill would have an effective interest rate of what (to the nearest hundredth percent)? Assume it is a $10,000 Treasury bill.
A) 8.20%
B) 8.16%
C) 8.19%
D) 9.00%
E) None of these
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (4) Explain and calculate the effective rate for a Treasury bill.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
52) The bank discounts an $8,750 simple discount note at 6% for 60 days. What is the discount amount?
A) $8.75
B) $78.50
C) $86.30
D) $87.50
E) None of these
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
53) The maturity value of a $28,000, 6%, 60-day interest-bearing note is:
A) $28,276.16
B) $28,140
C) $28,280
D) $22,800
E) None of these
Difficulty: 2 Medium
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
54) United Missouri Bank discounts a 120-day note for $60,000 at 6.75%. It uses 360 days in a year. What is the bank discount?
A) $1,200
B) $1,350
C) $1,250
D) $61,200
E) None of these
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
55) Justin discounts a 115-day note for $26,000 at 8.5%. The effective rate of interest to the nearest tenth percent is:
A) 0.8%
B) 0.87%
C) 8.5%
D) 8.7%
E) None of these
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
56) Tiffany purchased a $10,000, 13-week Treasury bill that is paying 2.25%. What is the effective rate on this T-bill? (round to the nearest hundredth of a percent)
A) 2.2%
B) 2.7%
C) 2.26%
D) 2.0%
E) None of these
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (4) Explain and calculate the effective rate for a Treasury bill.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
Match the following terms with their definitions.
A) Number of days bank will wait for its money in the discount process
B) Cash paid on due date
C) The principal
D) Maturity value minus bank discount
E) A written promise
F) Bank deducts interest in advance
G) Signs the note
H) Rate bank charges in the discounting process
I) True rate of interest
J) Due date
K) Ability to borrow quickly
L) Amount bank charges in the discounting process
M) Maturity value greater than original note
57) Simple discount note
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note; LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.; 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.; 11-01 (4) Explain and calculate the effective rate for a Treasury bill.; 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.; 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
58) Line of credit
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note; LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.; 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.; 11-01 (4) Explain and calculate the effective rate for a Treasury bill.; 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.; 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
59) Maturity value
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note; LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.; 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.; 11-01 (4) Explain and calculate the effective rate for a Treasury bill.; 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.; 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
60) Proceeds
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note; LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.; 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.; 11-01 (4) Explain and calculate the effective rate for a Treasury bill.; 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.; 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
61) Face value
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note; LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.; 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.; 11-01 (4) Explain and calculate the effective rate for a Treasury bill.; 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.; 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
62) Promissory note
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note; LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.; 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.; 11-01 (4) Explain and calculate the effective rate for a Treasury bill.; 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.; 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
63) Bank discount
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note; LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.; 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.; 11-01 (4) Explain and calculate the effective rate for a Treasury bill.; 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.; 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
64) Effective rate
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note; LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.; 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.; 11-01 (4) Explain and calculate the effective rate for a Treasury bill.; 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.; 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
65) Bank discount rate
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note; LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.; 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.; 11-01 (4) Explain and calculate the effective rate for a Treasury bill.; 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.; 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
66) Discount period
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note; LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.; 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.; 11-01 (4) Explain and calculate the effective rate for a Treasury bill.; 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.; 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
67) Interest-bearing note
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note; LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.; 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.; 11-01 (4) Explain and calculate the effective rate for a Treasury bill.; 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.; 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
68) Maker
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note; LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.; 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.; 11-01 (4) Explain and calculate the effective rate for a Treasury bill.; 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.; 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
69) Maturity date
Difficulty: 1 Easy
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note; LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.; 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.; 11-01 (4) Explain and calculate the effective rate for a Treasury bill.; 11-02 (1) Calculate the maturity value, bank discount, and proceeds of discounting an interest-bearing note before maturity.; 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
Answers: 57) F 58) K 59) B 60) D 61) C 62) E 63) L 64) I 65) H 66) A 67) M 68) G 69) J
70) Compute (A) bank discount, (B) proceeds for the following simple discount (use ordinary interest), and (C) the effective interest rate to nearest hundredth percent.
Face Value = $12,000, Discount Rate = 10%, Time = 125 days
A. $12,000 × .10 × 125/360 = $416.67; B. ($12,000 - $416.67) = $11,583.33; C. $416.67/($11,583 × (125/360)) = 10.36%.
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
71) Calculate the maturity value for this interest-bearing note using ordinary interest:
Face Value = $48,000, Time = 82 days, Rate = 12%
$48,000 + $1,312 = $49,312; $48,000 × .12 × 82/360 = $1,312
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
72) Complete the following for this interest-bearing note that is discounted at 11% (use 360 days).
Principal | Rate of Interest | Time | Maturity Value | Date Note Made | Date Note Discounted | Discount Period | Proceeds |
$90,000 | 8% | 50 days | A | June 2 | June 28 | B | C |
A. 90,000 × .08 × 50 / 360 = 1,000 + 90,000 = $91,000; B. 50 - 26 = 24 days; C. 91,000 × .11 × 24/360 = 667.33; 91,000 - 667.33 = $90,332.67.
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
73) Complete the following for this interest-bearing note that is discounted at 11%. (Use 360 days.)
Principal | Rate of Interest | Time | Maturity Value | Date Note Made | Date Note Discounted | Discount Period | Proceeds |
$50,000 | 12% | 120 days | A | Apr 5 | May 20 | B | C |
A. 50,000 × .12 × 120/360 = 2,000 + 50,000 = $52,000; B. Apr 5 to May 20 = 45 days; 120 - 45 = 75 days C. 52,000 × .11 × 75 / 360 = 1,191.67; 52,000 - 1,191.67 = $50,808.33.
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
74) Juan-Solez, a prominent painter, takes out a simple discount note for one year from River National Bank for $5,000. The annual rate of interest is 8%. What is the amount of:
A. Bank discount
B. Proceeds
C. Effective rate of interest (to nearest tenth percent)
A. $5,000 × .08 × 1 = $400; B. $5,000 - $400 = $4,600; C. $400/($4,600 × 1) = 8.7%.
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (3) Calculate and compare interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
75) Mobilee Oil Company accepted a $10,000, 120-day note dated March 3 at 8½% to settle a past-due account receivable. Mobilee Oil discounted the note to raise cash on May 10, at a discounted rate of 9%. What proceeds did Mobilee Oil receive? Use ordinary interest.
10,000 × .085 × 120/360 = 283.33; 10,000 + 283.33 = 10,283.33; 10,283.33 × .09 × 52/360 = $133.68
Proceeds = $10,283.33 - $133.68 = $10,149.65.
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
76) On May 12, Bob Campbell accepted a $5,000 note in granting a time extension of a bill for goods bought by Rick Ween. Terms of the note were 8% for 120 days. On July 8, Bob needed to raise cash and discounted the note at Rick's bank at a discount rate of 9%. Calculate Bob's proceeds. Use ordinary interest.
$5000 × .08 × 120/360 = $133.33; $5133.33 × .09 × 63/360 = $80.85; Proceeds = $5,133.33 - $80.85 = $5,052.48.
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
77) On October 18, Blue Ridge Corporation accepted a $300,000 non-interest-bearing note from Long Corporation. What is the maturity value of the note? Use ordinary interest.
$300,000; it is a non-interest-bearing note.
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
78) The face value of a simple discount note is $12,000. The discount is 6½% for 90 days. Use ordinary interest. Calculate the following:
A. Amount of interest charged for each note
B. Amount borrower would receive
C. Amount payee would receive at maturity
D. Effective rate (to the nearest tenth percent)
A. 12,000 × .065 × 90/360 = $195; B. 12,000 - 195 = $11,805; C. $12,000; D. 195 / (11,805 × 90/360) = 6.6%.
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
79) On July 18, Aui Lester accepted a $15,000, 7
%, 180-day note from Ryan O'Flynn. On October 5, Aui discounted the note at Brome Bank at 8
%. What proceeds did Aui receive? Use ordinary interest.
MV = 15,000 × .0775 × 180/360 = 581.25 + 15,000 = 15,581.25; Days left = 180 - 79 = 101 days; Bank Discount = 15,581.25 × .0825 × 101/360 = $360.64; 15,581.25 - 360.64 = $15,220.61
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
80) Jone Corporation accepted a $25,000, 8%, 120-day note on July 8. Jone discounted the note on September 4, at Rool Bank at 7%. What proceeds did Jone receive? Use ordinary interest.
MV = 25,000 × .08 × 120/360 = 666.67 + 25,000 = 25,666.67; Days left = 120 - 58 = 62; Bank Discount = 25,666.67 × .07 × 62/360 = 309.43; Proceeds = 25,666.67 - 309.43 = $25,357.224.
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
81) Wayne Night signed a $10,000 note at Lynn Bank that charges a 7% discount rate. Use ordinary interest. If the loan is for 150 days, find:
A. Proceeds
B. Effective rate charges by the bank (to the nearest tenth percent)
A. 10,000 × .07 × 150/360 = 291.67; 10,000 - 291.67 = $9,708.33; B. Eff Rate = 291.67 / (9,708.33 × 150/360) = 7.2%.
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
82) Compute bank discount using (A) ordinary interest, (B) proceeds, and (C) effective interest rate to the nearest hundredth. Do not round denominator in your calculation.
Face Value | Discount Rate | Time in Days |
$9,000 | 14% | 110 |
A. 9,000 × .14 × 110/360 = $385; B. 9,000 - 385 = $8,615; C. 385 / (8,615 × 110/360) = 14.63%.
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
83) Compute bank discount using (A) ordinary interest, (B) proceeds, and (C) effective interest rate to nearest hundredth. Do not round denominator in your calculation.
Face Value | Discount Rate | Time in Days |
$12,000 | 13% | 120 |
A. 12,000 × .13 × 120/360 = $520; B. Proceeds = $12,000 - $520 = $11,480; C. 520/(11,480 × (120/360)) = 13.59%.
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
84) Calculate maturity value for the interest-bearing note using ordinary interest:
Face Value | Interest Rate | Time in Days |
$42,000 | 13% | 79 |
42,000 × .13 × 79/360 = $1,198.17 + $42,000 = $43,198.17.
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
85) Calculate proceeds for the interest-bearing note using ordinary interest:
Face Value | Discount Rate | Time in Days |
$36,000 | 14% | 92 |
36,000 × .14 × 92/360 = $1,288; $36,000 - $1,288 = $34,712.
Difficulty: 2 Medium
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
86) Use ordinary interest:
Principal | Rate of Interest | Time | Maturity Value | Date Note Made | Date Note Discounted | Discount Period | Proceeds |
$60,000 | 14% | 60 days | A | July 5 | July 20 | B | C |
Note to be discounted at 11%
A. 60,000 × .14 × 60/360 = $1,400 + $60,000 = $61,400; B. 45 days; 15 days from July 5 to July 20; 60 - 15 = 45 days; C. 61,400 × .11 × 45/360 = $844.25; $61,400 - $844.25 = $60,555.75.
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
87) Use ordinary interest:
Principal | Rate of Interest | Time | Maturity Value | Date Note Made | Date Note Discounted | Discount Period | Proceeds |
$90,000 | 10% | 150 days | A | May 3 | June 12 | B | C |
Note to be discounted at 11%
A. 90,000 × .10 × 150/360 = 3,750 + 90,000 = $93,750; B. 110 days; May 3 till June 12 is 40 days; 150 - 40 = 110 days; C. $93,750 x .11 × 110/360 = $3,151.04; $93,750 - $3,151.04 = $90,598.96.
Difficulty: 2 Medium
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
88) Use ordinary interest:
Principal | Rate of Interest | Time | Maturity Value | Date Note Made | Date Note Discounted | Discount Period | Proceeds |
$70,000 | 11% | 90 days | A | Mar 10 | April 15 | B | C |
Note to be discounted at 10%
A. 70,000 × .11 × 90/360 = 1,925; $70,000 + $1,925 = $71,925; B. 54 days; Mar 10 till April 15 is 36 days; 90 - 36 = 54 days; C: 71,925 × .10 × 54/360 = 1,078.88; $71,925 - $1,078.88 = $70,846.12.
Difficulty: 2 Medium
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
89) Use ordinary interest:
Principal | Rate of Interest | Time | Maturity Value | Date Note Made | Date Note Discounted | Discount Period | Proceeds |
$18,000 | 8% | 120 days | A | June 9 | Sept 6 | B | C |
Note to be discounted at 10%
A. 18,000 × .08 × 120/360 = 480; $18,000 + $480 = $18,480; B. 31 days; June 9 till Sept 6 is 89 days; 120 - 89 = 31 days; C. 18,480 × .1 × 31/360 = 159.13; $18,480 - $159.13 = $18,320.87.
Difficulty: 2 Medium
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
90) On May 1, the Morse Company accepted a 60-day, $15,000 non-interest-bearing note from U Corporation. What is the maturity value of the note?
It is $15,000 because this is a non-interest-bearing note.
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
91) Abe Corp. discounted a 120-day note with a maturity value of $8,000 dated June 8 at the Village Bank on Sept. 2, at a discount rate of 9%. Use ordinary interest. How much did Abe receive?
Days = 120 - (days between Jun 8 and Sep 2) = 120 - 86 = 34; 8,000 × .09 × 34/360 = 68; 8,000 - 68 = $7932.
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
92) The face value of a simple discount note is $4,000. The bank discount is calculated at 12% for 60 days. Use ordinary interest. Calculate:
A. Amount of interest charged for note
B. Amount borrower would receive
C. Amount payee would receive at maturity
D. Effective rate (round to the nearest hundredth of a percent)
A. 4000 × .12 × 60/360 = $80; B. 4000 - 80 = $3,920; C. $4,000; D: 80 / (3920 × 60/360) = 12.24%.
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
93) On May 12, Joy Co. accepted a $1,000, 60-day, 6% note from Abe Wills, granting a time extension on a past-due account. Joy discounted the note at the bank at 9% on May 28. Use ordinary interest. Calculate Joy's proceeds.
1,000 × .06 × 60/360 = $10; MV = 1,000 + 10 = 1,010; Days left = 60 - 16 = 44; Interest = 1,010 × .09 × 44/360 = $11.11; Proceeds = $1,010 - $11.11 = $998.89.
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
94) On May 7, Ralph Blue accepted a $5,000 note from Dick Shea. Terms of the note were 7% for 180 days. On Aug. 19, Ralph could no longer wait for the money and discounted the note at Tover Bank at a discount rate of 8%. Calculate Ralph's proceeds. Use ordinary interest.
MV = 5,000 × .07 × 180/360 = $175; 5,000 + 175 = 5,175; Days left = 180 - 104 = 76; Bank rate = 5,175 × .08 × 76/360 = $87.40; Proceeds = $5,175 - $87.40 = $5,087.60.
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
95) Morris Bank discounts a 100-day note for $6,000 at 11%. Find (A) bank discount and (B) proceeds. Use ordinary interest.
A. 6,000 × .11 × (100/360) = $183.33; B. $6,000 - $183.33 = $5,816.67.
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
96) Alfred Corp. accepted a $12,000 note on July 15, with terms of 14% for 60 days. Alfred discounted the note on July 28, at the Victory Bank at 10%. What proceeds did Alfred receive? Use ordinary interest.
12,000 × .14 × 60/360 = $280; MV = 12,000 + 280 = $12,280; Days left = 60 - 13 = 47; Bank interest = 12,280 × .10 × 47/360 = $160.32; Proceeds = $12,280 - $160.32 = $12,119.68
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
97) Able Co. accepted a $20,000 note on March 10 with terms of 6%, 60 days. Able Co. discounted the note on March 20, at the Green Bank at 7%. Use ordinary interest. What net proceeds did Able receive?
20,000 × .06 × 60/360 = $200; MV = 20,000 + 200 = $20,200; Days left = 60 - 10 = 50 days; Bank charge = $20,200 × .07 × 50/360 = $196.39; Proceeds = $20,200 - $196.39 = $20,003.61.
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
98) On October 15, Daniel Miller accepted a $5,000, 60-day, 8% note from Bill Boyer granting a time extension on a past-due amount. Daniel discounted the note at Volve Bank at 9% on Oct. 26. Use ordinary interest. Calculate Daniel's proceeds.
5,000 × .08 × 60/360 = $66.67; MV = 66.67 + 5,000 = $5,066.67; Days left = 60 - 11 = 49 days; Bank charge = $5,066.67 × .09 × 49/360 = $62.07; Proceeds = $5,066.67 - $62.07 = $5,004.60.
Difficulty: 3 Hard
Topic: LU 11-02 Discounting an Interest-Bearing Note before Maturity
Learning Objective: 11-02 (2) Identify and complete the four steps of the discounting process.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
99) Lois Longin buys a $10,000 13-week Treasury bill at 11%. Use ordinary interest. What is her effective rate to nearest hundredth percent?
10,000 × .11 × 13/52 = $275; $275/($9,725 × (13/52)) = 11.31%.
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (4) Explain and calculate the effective rate for a Treasury bill.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
100) Molly Lenny bought a $10,000 13-week Treasury bill at 13%. What is her effective rate? Use ordinary interest. Round to nearest hundredth percent.
10,000 × .13 × 13/52 = $325; $325/($9,675 × (13/52)) = 13.44%.
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (4) Explain and calculate the effective rate for a Treasury bill.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
101) Calculate the maturity value for an interest-bearing note of $28,500 for 118 days at 8%.
I = $28,500 × .08 × 118/360 = $747.33; MV = 747.33 + 28,500 = $29,247.33
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
102) Mark Price, the owner of Biggie's Restaurant, took a simple discount note for two years from PNC Bank for renovations. His loan was for $10,000 at a 6% discount rate. Calculate (A) bank discount, (B) proceeds, (C) effective rate to the nearest tenth.
(B) $8,800
(C) 6.8%
A. 10,000 × .06 × 2 = $1,200; B. 10,000 - 1,200 = $8,800; C. 1,200 / (8,800 × 2) = .06818 = 6.8%.
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.; 11-01 (3) Calculate and compare the interest, maturity value, proceeds, and effective rate of a simple interest note with a simple discount note.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
103) Shelley Ann signed a $20,000 note for 120 days at Concord Bank that charges a 5.5% discount rate. What are Shelley's discount and her proceeds?
Discount = 20,000 × .055 × 120/360 = $366.67; Proceeds = $20,000 - $366.67 = $19,633.33
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
104) Lisa Davidson signed a $12,000 note from Springfield National Bank at a 5% discount for 222 days (assume 360 days in a year). Calculate the bank discount.
Discount = 12,000 × .05 × 222/360 = $370
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (2) Calculate bank discount and proceeds for simple discount notes.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
105) Calculate the maturity value for a note at $51,000 for 62 days at 9%.
I = 51,000 × .09 × 62/360 = $790.50; MV = $51,000 + $790.50 = $51,790.50
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
106) Calculate the maturity value for a note at $61,000 for 62 days at 5% (use 360).
I = 61,000 × .05 × 62/360 = $525.28; MV = $61,000 + $525.28 = $61,525.28
Difficulty: 3 Hard
Topic: LU 11-01 Structure of Promissory Notes; the Simple Discount Note
Learning Objective: 11-01 (1) Differentiate between interest-bearing and non-interest-bearing notes.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
Document Information
Connected Book
Business Math Procedures 13e Test Bank with Answers
By Jeffrey Slater