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    Approach to Compute Cost of Promissory Note

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    ABC company draws a promissory note with a face value of $ 100,000. It is issued on 1st July and matures on 31st July
    a) What is the interest rate if drawer receives $99,023?
    b) How much is obtained by drawer if the interest rate is 12% p.a.?

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    Cost of promissory note finance

    Promissory note is a short term financial instrument whereby the borrower ( drawer) promises to repay the face value, at maturity to the holder. The cost of promissory note can be computed in the following manner:
    1) The amount of interest will be equal to the maturity or face value( V) minus ...

    Solution Summary

    The solution discusses the approach to compute the cost of promissory note.