Chang Co. issued a $50,000, 120-day, discounted note to Guarantee Bank. The discount rate is 6%. Assuming a 360-day year, the cash proceeds to Chang Co. are

A) $49,750
B) $47,000
C) $49,000
D) $51,000

Question

Chang Co. issued a $50,000, 120-day, discounted note to Guarantee Bank. The discount rate is 6%. Assuming a 360-day year, the cash proceeds to Chang Co. areA)  $49,750B)  $47,000C)  $49,000D)  $51,000

Johnny Kilroy · Accepted Answer

Final Answer : C, Explanation :  The cash proceeds can be calculated using the formula for the discount: Proceeds = Face Value - (Face Value * Discount Rate * (Time/360)). Here, it's $50,000 - ($50,000 * 6% * (120/360)) = $50,000 - $1,000 = $49,000.

Chang Co. issued a $50,000, 120-day, discounted note to Guarantee Bank. The discount rate is 6%. Assuming a 360-day year, the cash proceeds to Chang Co. are

A) $49,750
B) $47,000
C) $49,000
D) $51,000

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