## Ch. 11 Quiz

Instructions
Ch.11 Quiz

This assessment is worth 100 points.

1. A simple discount note does not involve a bank discount.
(4 points)

 True False

2. A simple discount note results in a higher interest rate (effective) than a simple interest note.
(4 points)

 True False

3. The purchase price (or proceeds of a Treasury Bill) would be the value of the Treasury Bill plus the discount.
(4 points)

 True False

4. The calculation of the bank discount when discounting an interest-bearing note does use maturity value.
(4 points)

 True False

5. Proceeds from discounting an interest-bearing note is the principal less the bank discount.
(4 points)

 True False

6. The effective rate of a \$25,000 non-interest-bearing simple discount 10 percent, 90 day note is:
(5 points)

 a. 10.62 percent b. 10 percent c. 10.8 percent d. 10.26 percent e. None of the above

7. When discounting an interest-bearing note the discount period represents:
(5 points)

 a. The maturity date b. Date of original note c. Number of days from date of discount to date of maturity d. Number of days from date of original note till date of maturity e. None of the above

8. A \$9,000, 11 percent, 180-day note, dated March 18, is discounted on July 8. Assuming a 9 percent discount rate the bank discount is:
(5 points)

 a. \$116.24 b. \$116.42 c. \$161.42 d. \$933.58 e. None of the above

9. A \$25,000, 15 percent, 80-day note, dated November 5, is discounted at National Bank on January 5. The discount period is:
(5 points)

 a. 80 days b. 19 days c. 61 days d. 91 days e. None of the above

10. Murray discounts a 120-day note for \$20,000 at 11 percent. The proceeds would be: (Assume ordinary interest)
(5 points)

 a. \$ 733.33 b. \$19,266.67 c. \$20,733.33 d. \$20,000.00 e. None of the above

11. Shelley Corporation discounted a \$7,000, 90-day note, dated June 18, at the Sunshine Bank on July 18 at a discount rate of 12 percent. (Assume the \$7,000 is the maturity value) The amount of Bank discount is:
(5 points)

 a. \$ 70 b. \$210 c. \$140 d. \$240 e. None of the above

12. Compute
(a) Bank discount; (b) Proceeds for the following simple discount (use ordinary interest); and (c) the effective interest rate to nearest hundredth percent.

 \$12,000 10% 125 days
 (face) (disc. rate) (time)
 A. _____________
 B. _____________
 C. _____________

(5 points)

(* 4000 character limit)

13. Calculate
Maturity value for this interest-bearing note using ordinary interest.
\$48,000   82 days   12%.
(5 points)

(* 4000 character limit)

14. Mobilee Oil Company accepted a \$10,000, 120-day note, dated March 3, at 8 1/2% to settle a past due account receivable. Mobilee Oil discounted the note to raise cash on May 10 at a discounted rate of 9%. What proceeds did Mobilee Oil receive?
(5 points)

(* 4000 character limit)

15. On October 18, 2001 Blue Ridge Corporation accepted a \$300,000 non-interest-bearing note from Long Corporation. What is the maturity value of the note?
(5 points)

(* 4000 character limit)

16. Wayne Night signed a \$10,000 note at Lynn Bank that charges a 7% discount rate. If the loan is for 150 days, find:
A. Proceeds
B. Effective rate charges by the bank (to the nearest tenth percent).
(5 points)

(* 4000 character limit)

17. Compute bank discount, proceeds (use ordinary interest) and effective interest rate (to nearest hundredth). Do not round denominator in your calculation.
\$12,000   13%   120 days
(5 points)

(* 4000 character limit)

18. Calculate maturity value for the interest bearing note using ordinary interest.
\$36,000   92 days   14%.
(5 points)

(* 4000 character limit)

19. On May 12, Joy Co. accepted a \$1,000, 60-day, 6 percent note from Abe Wills, granting a time extension on a past due account. Joy discounted the note at the bank at 9 percent on May 28. Calculate Joy's proceeds.
(5 points)

(* 4000 character limit)

20. On October 15, Daniel Miller accepted a \$5,000, 60-day, 8 percent note from Bill Boyer granting a time extension on a past due amount. Daniel discounted the note at Volve Bank at 9 percent on Oct. 26. Calculate Daniel's proceeds.
(5 points)

(* 4000 character limit)

21. Molly Lenny bought a \$10,000 13 week treasury bill at 13%. What is her effective rate? Round to nearest hundredth percent.
(5 points)

(* 4000 character limit)