Asked by Megan Byers on Jul 02, 2024
Marcia Driscoll held a $2,650, 90-day, non-interest-bearing note dated September 15. On October 15, she took the note to a bank which discounted the note at 13%. Use a 365-day year to find the missing information on the loan.
Non-Interest-Bearing Note
A financial instrument that does not accrue interest over time, meaning the borrower pays back only the principal amount borrowed.
Discount Rate
The interest rate charged by central banks on loans to commercial banks or the rate used in discounted cash flow analysis to determine the present value of future cash flows.
- Compute the discount rate and total earnings from different lending options.
- Ascertain the real interest rate using proceeds instead of the nominal value, considering various day counts, including 365-day and 360-day years.
- Utilize understanding on discounting non-interest-bearing notes.
Learning Objectives
- Compute the discount rate and total earnings from different lending options.
- Ascertain the real interest rate using proceeds instead of the nominal value, considering various day counts, including 365-day and 360-day years.
- Utilize understanding on discounting non-interest-bearing notes.
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