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Jack Cobb signed a simple discount note with a face value of $12000 at a discount rate of 14% for 7 months. Find the proceeds of the note and the effective interest rate

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Answer:

Proceeds = $11020

Effective interest rate = 15.2%

To find the proceeds of the note, we will subtract the bank discount from the face value

[tex]Discount=12000\times0.14\times\frac{7}{12}=980[/tex][tex]\text{Proceeds}=12000-980=11020[/tex][tex]R=\frac{I}{PT}[/tex][tex]R=\frac{980}{(11020)(\frac{7}{12})}[/tex][tex]R=0.15245=15.2\%[/tex]

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