Business Math: Ch. 11 Learnsmart

Match the Simple Discount Note terms to their respective definitions. 1. Proceeds 2. Simple Discount Note 3. Bank Discount 4. Bank Discount Rate A. The amount the borrower receives after the bank deducts the interest from the maturity value. B. The percent of interest used in determining the discount amount. C. A note where the interest has been deducted in advance. D. The amount of interest that the bank deducts in advance

1. = A. 2. = C. 3. = D. 4. = B.

Select the terms with the definitions of a T-bill. 1. Purchase price 2. Discount 3. Maturity value 4. Effective rate A. The value of the T-bill less the discount. B. The face value of the T-bill. C. The actual interest rate. D. The interest of the T-bill.

1. = A. 2. = D. 3. = B. 4. = C.

1. Interest-bearing 2. Non interest-bearing A. Maturity Value = Face Value B. Maturity Value = Face Value + Interest

1. = B. 2. = A.

Franklin & Sons issued a $5,000, 60-day note to Jefferson Inc. Match each of the values to the respective terms. 1. $5,000 2. 60-day 3. $0 A. Time B. Maturity value C. Interest

1. = B. 2. = A. 3. = C.

1. Face Value 2. Term 3. Rate 4. Maker 5. Payee 6. Maturity Date 7. Date A. The company issuing the note/borrowing the money. B. Amount of money borrowed. C. Date that the note was issued. D. Date that the principle and interest are due. E. Length of time that the money is borrowed. F. The company extending the credit. G. The annual percentage for the cost of borrowing money.

1. = B. 2. = E. 3. = G. 4. = A. 5. = F. 6. = D. 7. = C.

Ida purchased $100,000 in 1 year Treasury bills at 3%. Match the amounts to their respective terms. 1. 1 Year 2. 3% 3. 3.09% 4. $3,000 5. $97,000 6. $100,000 A. Simple discount rate B. Face value C. Purchase price D. Time E. Discount F. Effective rate

1. = D. 2. = A. 3. = F. 4. = E. 5. = C. 6. = B.

Franklin & Sons issued a $5,000, 6%, 60-day note to Jefferson Inc. Match each of the values to the respective terms. 1. 6% 2. $5,000 3. 60-day 4. $50 5. $5,050 A. Face value B. Interest C. Maturity value D. Time E. Stated interest rate

1. = E. 2. = A. 3. = D. 4. = B. 5. = C.

Scott Family Grocer borrowed $8,000 for 100 days at 15% simple discount rate. How much are the proceeds? A. $7,666.67 B. $8,000 C. $333.33

A. $7,666.67

The proceeds of a simple interest note are (less than/equal to/greater than) _______________ _________ the proceeds of a simple discount note. A. greater than B. equal to C. less than

A. greater than

Select the equation for finding maturity value of an interest-bearing note. A. Face value = maturity value B. Face value + Interest C. Face value X rate X time

B. Face value + Interest

T-bills are what type of note? A. Interest-bearing note B. Simple discount note C. Simple interest note

B. Simple discount note

A discounted note is an example of a: A. two-party transaction B. three-party transaction C. one-party transaction

B. three-party transaction

Treasury bills are a loan to the federal government for: A. 13 days B. 91 weeks C. 13 weeks

C. 13 weeks

Order the steps in discounting a note. A. Calculate the discount period. B. Calculate the proceeds. C. Calculate the interest and maturity value. D. Calculate the bank discount.

C. Calculate the interest and maturity value. A. Calculate the discount period. D. Calculate the bank discount. B. Calculate the proceeds.

The calculated interest on a simple interest note is __________ ________ the interest calculated on a simple discount note. A. less than B. greater than C. equal to

C. equal to

T/F: Although simple discount notes have an interest component, they are sometimes referred to as noninterest-bearing notes.

True