Answer:
12%
Explanation:
The computation of the discount rate used by the bank is shown below:
The Amount of discount is
= $49,203 - $47,727
= $1,476
Now the discount rate is
= $1,476 × 4 ÷$4,9203
= 12%
hence the discount rate that used by the bank for determining the proceeds is 12% and the same is to be considered
The discount rate used by the bank in computing the proceeds was 12% APR.
Data and Calculations:
Cash proceeds from the note = $47,727
Face value of the note = $49,203
Discount = $1,476 ($49,203 - $47,727)
Discount rate is for 90 days = 3% ($1,476/$49,203 x 100)
For a 360-day year, the discount rate = 12% ($1,476/$49,203 x 100) x 360/90
Thus, the discount rate used by the bank in computing the proceeds was 12% APR.
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