Asked by Rachel Dominguez on Apr 27, 2024
Verified
A $4,800, 10% note dated June 2 for 90 days was discounted on August 19 at 13%. The number of days in the discount period is 15 days.
Discount Period
The discount period is the timeframe during which a seller offers a buyer a reduction in the amount owed if payment is made within a specified time.
Discounted Note
A debt instrument sold for less than its face value that will pay the face value at maturity, effectively representing a loan made by the buyer to the issuer.
- Evaluate and quantify the duration of the discount and its repercussions on transactions concerning notes.
Verified Answer
AM
Angelique MathisMay 02, 2024
Final Answer :
False
Explanation :
The discount period is the time between the discount date (August 19) and the maturity date of the note. Since the note is for 90 days starting from June 2, it matures on August 31. Therefore, the discount period is from August 19 to August 31, which is 13 days, not 15.
Learning Objectives
- Evaluate and quantify the duration of the discount and its repercussions on transactions concerning notes.