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| 1 | |
The principal of a promissory note is the face value. |
| | A) | True |
| | B) | False |
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| 2 | |
Banks can never deduct interest in advance on a loan. |
| | A) | True |
| | B) | False |
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| 3 | |
Maturity value equals face value plus interest. |
| | A) | True |
| | B) | False |
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| 4 | |
The purchase price (or proceeds of a Treasury Bill) would be the value of the Treasury Bill plus the discount. |
| | A) | True |
| | B) | False |
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| 5 | |
The discount period represents the exact number of days the original lender will have to wait for the note to come due. |
| | A) | True |
| | B) | False |
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| 6 | |
A promissory note: |
| | A) | is an oral promise |
| | B) | is a conditional promise |
| | C) | has a fixed time |
| | D) | has a variable time in future to be paid |
| | E) | None of the above |
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| 7 | |
A simple discount note results in: |
| | A) | lower interest costs than a simple interest note |
| | B) | same interest costs than a simple interest note |
| | C) | interest deducted when note is paid back |
| | D) | interest deducted in advance |
| | E) | None of the above |
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| 8 | |
The proceeds of a $20,000 non-interest- bearing simple discount 13 percent, 90 day note is: |
| | A) | $20,000 |
| | B) | $19,350 |
| | C) | $20,650 |
| | D) | $19,530 |
| | E) | None of the above |
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| 9 | |
When discounting an interest-bearing note the discount period represents: |
| | A) | The maturity date |
| | B) | Date of original note |
| | C) | Number of days from date of discount to date of maturity |
| | D) | Number of days from date of original note till date of maturity |
| | E) | None of the above |
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| 10 | |
If one discounts a non-interest note all the following would be used except: |
| | A) | Principal + Interest |
| | B) | Discount Rate |
| | C) | Discount Period |
| | D) | Face value of the note |
| | E) | None of the above |
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| 11 | |
A $25,000, 15 percent, 80-day note, dated November 5, is discounted at National Bank on January 5. The discount period is: |
| | A) | 80 days |
| | B) | 19 days |
| | C) | 61 days |
| | D) | 91 days |
| | E) | None of the above |
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| 12 | |
J. Ryan discounts an 80-day note for $15,000 at 12 percent. The bank discount is: (Assume ordinary interest) |
| | A) | $14,600 |
| | B) | $15,400 |
| | C) | $400 |
| | D) | $15,000 |
| | E) | None of the above |
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| 13 | |
Jay discounts a 100-day note for $25,000 at 13 percent. The effective rate of interest to the nearest hundredth percent is: |
| | A) | 13.48 percent |
| | B) | 13.49 percent |
| | C) | 13.02 percent |
| | D) | 13.03 percent |
| | E) | None of the above |
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| 14 | |
Ray Furniture wants to buy a dining room for $8,125 with a 20 percent trade discount. Ray needs the cash to pay the bill and is considering discounting a 90 day note dated May 12 with a maturity value of $6,500 at Hunt Bank at a discount rate of 13 percent on June 5. The bank discount if Ray discounts the note is: |
| | A) | $211.25 |
| | B) | $1,400 |
| | C) | $154.92 |
| | D) | $212.15 |
| | E) | None of the above |
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| 15 | |
Ralph Corporation accepted a $15,000, 11 percent, 120-day note dated August 19 from Jay Company in settlement of a past bill. On October 20, Ralph Corporation decided to discount the note at a discount rate of 12 percent. The proceeds to Ralph Corporation is: |
| | A) | $1,517.97 |
| | B) | $1,517.79 |
| | C) | $15, 249.73 |
| | D) | $15,249.37 |
| | E) | None of the above |
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