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)

      
      

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

      
      

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

      
      

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

      
      

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

      
      

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

    a.  
    b.  
    c.  
    d.  
    e.  

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

    a.  
    b.  
    c.  
    d.  
    e.  

  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.  
    b.  
    c.  
    d.  
    e.  

  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.  
    b.  
    c.  
    d.  
    e.  

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

    a.  
    b.  
    c.  
    d.  
    e.  

  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.  
    b.  
    c.  
    d.  
    e.  

  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)



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