On January 26, Nyree Co. borrowed cash from Conrad Bank by issuing a 45-day note with a face amount of $150,000.
a. Determine the proceeds of the note, assuming the note carries an interest rate of 10%.
b. Determine the proceeds of the note, assuming the note is discounted at 10%.
Answer:
a. $150,000
b. $148,125 [$150,000 – ($150,000 × 45/360 × 10%)]