Ron Prentice bought goods from Shelly Katz On May 8 Shelly g

Ron Prentice bought goods from Shelly Katz. On May 8, Shelly gave Ron a time extension on his bill by accepting a $3,000, 8%, 180-day note. On August 16, Shelly discounted the note at Roseville Bank at 9%. (Use Days in a year table.)

What proceeds does Shelly Katz receive? (Use 360 days a year. Do not round intermediate calculations. Round your answer to the nearest cent.)

Proceeds received            

Solution

Step 1

Discount Period = 8 May to 16 August

Discount period = 80 Days

Amount of Interest

I = P*R*T

P = $3000

R = 8% = 0.08

T = 180days = 1/2 year

I = 3000*0.08*1/2 = $120

Interest = $120

Maturity Value = $3000 + $120 = $3120

Bank discount = 3000*0.09*80/360 = $62.40

Proceeds received by Shelly Katz = $3120 - 62.40 = $3057.60

Proceeds received by Shelly Katz = $3058