Share
Explore BrainMass

This material suggests approach to compute cost of promissory note

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.?
Solution

Solution Preview

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 the sum borrowed ...

$2.19