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    Allied Bank Bank Note

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    Allied Bank was the holder of a 3-month note dated June 18th with a discount rate of 12%. The face value was $10,000. On July 20th, Allied Bank rediscounted the note at Trusted Bank at 11%. Discuss how to calculate how much Allied Bank loaned to the maker of the note and how much Allied would receive when the note was rediscounted.

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    Solution Preview

    For this note:
    FV = 10000
    N = 3/12 = 0.25
    Rate = I/Y = 12% = 3%
    Then by a financial calculator, we can compute ...

    Solution Summary

    Computations provided for you.