I don't know how they came up with $5100; perhaps you should double check
that number.
In a discounted loan, the discounted
amount(Int.) is paid up-front by deducting it from the amount borrowed:
Ab = $2,000 = Amount borrowed = Face
value.
Ar = Amount received by borrower.
Ad = Amount discounted(Int.).
Rate = 10%
T = 180 Days.
Ar = Ab - Ad
Ar = Ab - Ab*r*T
Ar = 2000 - 2000*(0.1/360)*180
Ar = 2000 - 100 = $1900.
On the maturity date, borrower will pay
the face value (Ab) of $2000.
For a regular loan, the interest and
amount borrowed are paid on the maturity
date:
A = Ab + I
A = Ab + Ab*r*T
A = 2000 + 2000*(0.1/360)*180
A = 2000 + 100 = $2100 = Amt. paid on
the maturity date. On the date of the
loan, the borrower received $2,000.
NOTE: In both cases, the cost of the loan was $100.
9.A 10%,100-day note was dated 20 september 1992.the maturity value of the note was $3083.33.If the note was discounted on 17 november 1992 at 12%,FIND
i) the maturity date of the note
= 29 december 1992
ii)the face value of the note
$3083.33 = (1+0.1(100/360)
= 1.0278
= 3083.33/1.0278
= 2.999.9
or
= (1-0.1(100/360)
= 0.9722
= 3083.33/0.9722
= 3171.49
but the answer is = 5100
actually i still confuse what actually formula to find face value.we need - or + ?
1 answer
0 answers