Promissory note question

Question

Raindrop Inc owes a past due bill to Jax Corp. On August 8, Jax agrees to accept a $5000, 8%, 120-day note as payment from Raindrop. On October 11, Jax discounts the note at Park Bank at 9%. Find the: (a) Maturity Value, (b) discount period, (c) bank discount, and (d) Jax’s proceeds.

Answer 1

Solution a:

Maturity value = $5,000 + ($5,000*8%*120/365) = $5,131.51

Solution b:

Discount period = Maturity date - Discount date = 6th Dec - October 11 = 56 days

Solution c:

Bank discount = $5,131.51*9%*56/365 = $70.86

Solution d:

Jax proceed = $5,131.51 - $70.86 = $5,060.65