EXERCISES 2.1
March 7 is the 65th day of the year, so the note matures on the 66 70 136th day of the
year. The state aid will be received on May 16, 2005.The exercises include a number of other problems that make use of many of the skills
developed in Chapter 1.Copyright © 2008, The McGraw-Hill Companies, Inc.
A. TerminologyIn each of the following situations, fi nd (a) the maturity value, (b) the proceeds, and (c) the amount of discount.- A lender loaned a borrower $750 on May 8, and the borrower repaid the loan by giving the lender $800 on June 10.
- A note will mature for its face value of $20,000 in 100 days. You buy the note for $1,000 less than its face value.
- Stewart’s New Arts Gallery received $18,000 from a lender on March 1, and paid off the loan on October 15 with a
check for $20,000. - The payments between a borrower and lender are illustrated in the following time line:
$23,467.19 $24,500
10/3/05 7/19/06
- Kyle will be getting a paycheck of $1,308.55 at the end of the month. Sammy agreed to give him $1,275 today in
exchange for the check when it comes. - If you give me $20 today, I will pay you back $25 next Tuesday.
B. Calculating Simple Discount and Proceeds- A note has a maturity value of $10,000. If the term is 200 days and the simple discount rate is 9%, fi nd (a) the amount
of discount and (b) the proceeds. - To fi nance the building of a new fi re station, the Farmview Fire District issued discount notes, each having a face value of
$1,000 and a term of 5 years. The notes were sold at a simple discount rate of 3%. Find the proceeds of each note sold. - Derron knows that he will be receiving $100,000 to settle an insurance claim, but he will not actually be paid for
another 2 months. Needing cash now, he is considering an offer from a fi nance company to buy this payment from
him by paying him cash today. The simple discount rate they are offering him is 35%. How much would he receive if
he takes this deal?
Exercises 2.1 61