Question
On September 5th, Sheffield Company discounted at Sunshine Bank a 9000.00 (maturity value), 120-day note dated June 5th. Sunshine's discount rate was 9%. What proceeds did sheffield company receive. We are using 360 day and NOT 365
Answers
I did it both ways, 360 and 365. Look again
If we used a banker's 360 day year, 120 days is 1/3 year
interest = (9,000/3)*.09 = 270.00
and the company gets
9,000-270 = 8730
Note that the company gets less and the bank gets more using a "banker's year"
interest = (9,000/3)*.09 = 270.00
and the company gets
9,000-270 = 8730
Note that the company gets less and the bank gets more using a "banker's year"