The Amount the Bank Charges When It Discounts a Note

question 10

Multiple Choice

The amount the bank charges when it discounts a note is calculated as:

• A) bank discount = note principal × bank discount rate × (discount period /360 days).
• B) bank discount = maturity value × bank discount rate × (original note period /360 days).
• C) bank discount = maturity value × bank discount rate + original interest rate × (discount period /360 days).
• D) bank discount = maturity value × bank discount rate × (discount period /360 days).

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Definitions:

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