- Brittany bought a discount bond issued by the State of California with a maturity value of $20,000. The discount rate
was 3.19% and the term was 175 days. How much did Brittany pay for the bond?
C. Finding Maturity Value, Discount Rate, and Term
- Find the maturity value of a 6-month discount note if the discount is $250 and the discount rate is 12.5%.
- Hall’s Homestyle Horseradish Farms signed a $25,000 discount note with a term of 90 days. The company received
proceeds of $24,325. Find the simple discount rate for this note. - Suppose that an investment manager buys a $10,000 U.S. government discount note for $9,759.16. If note matures in
217 days, fi nd the simple discount rate. - A note with a maturity value of $5,000 is sold at a simple discount rate of 4%. If the proceeds are $4,975, what is the
term of the note? - Handy Dandy Discount Loans offers Jason $785.21 in exchange for a paycheck of $800, which he will be receiving in a
few days. If the simple discount rate is 75%, in how many days is Jason expecting his paycheck?
D. Grab Bag
- A $2,000 face value discount note matures on June 17. Marco bought this note on April 8 at a simple discount rate of
5.72%. How much did he pay for the note? - You agree to pay me $180 one month from now if I will give you $160 today. What is the simple discount rate for this deal?
- Find the amount of discount if an $8000 maturity value T bill is sold at auction for $7,856.02.
- A $5,000 T bill is sold at auction for $4,876.52. The term is 182 days. Find the simple discount rate.
- Find the proceeds for a discount loan if the maturity value is $23,507 and the amount of discount is $1,851.03.
- Ed’s Worldwide Lawn Furniture Emporium has received an order for $875,000 worth of picnic tables. The buyer will pay
for the tables on delivery, 45 days from now. In need of cash right away, Ed considers selling this payment to a fi nance
company at a simple discount rate of 24%. What proceeds would he receive if he took this deal? - On June 28, 2005, I decided to invest some money by buying a $1,000 face value discount note, with a maturity date of
December 31, 2005 and a simple discount rate of 5.89%. How much of a discount will I get off the note’s face value?
62 Chapter 2 Simple Discount