Reference no: EM13275370

Problem 1

Suppose you signed a 6-month promissory note on January 15, 2004 for a face value of $4,300. Interest rate on the loan was 14%, simple interest. The holder of the note sold the note at 17%, bank discount rate 20 days after receiving the note from you.

A. What are the proceeds of this sale?

B. If the note was sold at simple discounting conditions instead, at a simple discount rate of 17%, how much would the sellerleceive for the note?

Problem 2

Suppose you had taken out a demand loan instead for the same principal and interest rate as in Problem 1. You made a payment equal to 1/4 of the principal 30 days later and another payment 30 days after that equal to 1% of the outstanding principal after the first payment was made.

A. How much would you need to pay to discharge this loan 180 days after taking out the loan using the Method of Declining Balance?

B. How much would be the amount required to discharge the loan using an equation of value with focal date at 180 days? (i.e., Merchant's Rule)? Use the same sized payments determined from the time diagram for Problem 2A.

Attachment:- Assignment.rar