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# How much would your friend receive from the sale of the promissory note?

You borrow \$5,000 at a simple 15% interest rate from your friend for 18 months in order to purchase new furniture and sign on a promissory note on your borrowing. 5 months later, your friend sells the promissory note to a bank that charges a 20% discount rate (Bank discount).

### 1 Answer by Expert Tutors

Michael K. | I can help you pass the class, take the test, or get into the college.I can help you pass the class, take the ...
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I'll give it a shot.

Simple interest implies that at the end of paying off the loan in 18 months, I'll have paid back \$5000*115%, which is \$5750.

If I am making monthly payments over the course of the loan, in 5 months, I'll have paid back \$5750/18= \$319.444...*5=\$1597.222...

I plan to pay the rest, \$5750-\$1597.222=\$4152.777... to the bank.

After taking 20%, they pay my friend 80% of that, so she gets \$4152.777...*80%=\$3322.222...

How's that?