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Exam 11: Promissory Notes, Simple Discount Notes and the Discount Process

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Question 21

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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

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Question 22

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The maturity value of a non-interest-bearing note is the same as its face value.

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Question 23

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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:

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:

B. Blue discounts a 90-day note for $20,000 at 4%. The bank discount is (assume ordinary interest) :

Proceeds from discounting an interest-bearing note is the principal minus the bank discount.

All interest-bearing notes must have the rate stated on the note.

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:

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:

An 8% 13-week Treasury bill would have an effective interest rate of (to the nearest hundredth percent) ? Assume it is a $10,000 Treasury bill.

A promissory note is always an oral promise.

The bank discount of an $18,000 non-interest-bearing, simple discount 8%, 90-day note is:

A simple discount note results in a higher interest rate (effective rate) than a simple interest note.

A $7,000, 4%, 120-day note dated March 20 is discounted on July 15. Assuming a 3% discount rate, the bank discount is:

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:

In calculating the bank discount when discounting an interest-bearing note, which one of the following is not used in the calculation?

The maturity value of a $16,000 non-interest-bearing, simple discount 6%, 60-day note is:

A simple discount note does not involve a bank discount.

A $15,000, 6%, 50-day note dated November 8 is discounted at 5% on November 28. The proceeds of the note would be:

Bank discount on a simple discount note is based on the amount a borrower receives and not what he or she pays back.