Compute Bank Discount Using (A)ordinary Interest, (B)proceeds, and (C)effective Interest

question 104

Short Answer

Compute bank discount using (A)ordinary interest, (B)proceeds, and (C)effective interest rate to the nearest hundredth. Do not round denominator in your calculation.
$$\begin{array} { | c | c | c | } \hline \text { Face Value } & \text { Discount Rate } & \text { Time in Days } \\\hline \$ 9,000 & 14 \% & 110 \\\hline\end{array}$$

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Definitions:

Net Present Value

An economic measure that determines the disparity between the current value of cash coming in and the current value of cash going out over a specific timeframe.

Internal Rate Of Return

The break-even discount rate at which a project's cash flows net present value is zero.

Present Value

Present value represents the contemporary worth of a future sum or cash flow sequence, discounted by a certain return rate.

Payback Method

A capital budgeting technique that calculates the amount of time required to recoup the original investment.