TUTORIAL 4

BANK DISCOUNT AND PROMISSORY

NOTES

PREPARED BY: NORZANAH ABD RAHMAN

PART A, QUESTION 2
1. JULY 2020 (RM 2000)
Fatimah received a 120-day promissory note with a simple interest of 6.85% per annum. The of the note
is RM2,045.67. Find the face value of the note. (5 marks)
PART A, QUESTION 2
2. DEC 2019 (RM 37974.68)
David needs RM30,000 now to start a business. How much should he borrow from a bank for 3 years
at 7% bank discount rate? (5 marks)

Given that,
𝑃𝑟𝑜𝑐𝑒𝑒𝑑𝑠 = 𝑅𝑀30000 <−−− −𝑘𝑒𝑦𝑤𝑜𝑟𝑑 𝑵𝒆𝒆𝒅𝒔 𝑖𝑛𝑑𝑖𝑐𝑎𝑡𝑒𝑠 𝑡ℎ𝑎𝑡 𝑅𝑀30000 𝑖𝑠 𝑡ℎ𝑒 𝒑𝒓𝒐𝒄𝒆𝒆𝒅𝒔
𝑡 = 3 𝑦𝑒𝑎𝑟𝑠
𝑑 = 7% = 0.07
𝑆 (𝑏𝑜𝑟𝑟𝑜𝑤𝑠) = ? <-----keywords borrow indicates that the amount we have to find is S

𝑃𝑟𝑜𝑐𝑒𝑒𝑑𝑠 = 𝑆 1 − 𝑑𝑡

30000 = 𝑆 1 − (0.07)(3)

30000 = 𝑆 1 − 0.21

30000 = 𝑆 0.79

30000
=𝑆
0.79

30000
=𝑆
0.79

𝑆 = 𝑅𝑀37974.68
PART A, QUESTION 2
3. JUNE 2019 (RM 3673.47)
Syamsina needs RM3500 now. Find the amount that she should borrow for 200 days from a bank that
charges 8.5% bank discount rate. (5 marks)

Given that,
𝑃𝑟𝑜𝑐𝑒𝑒𝑑𝑠 = 𝑅𝑀3500 -Keyword Needs
200
𝑡 = 200 𝑑𝑎𝑦𝑠 𝑛𝑜 𝑟𝑢𝑙𝑒𝑠 𝑚𝑒𝑛𝑡𝑖𝑜𝑛? 𝑢𝑠𝑒 𝐵𝑎𝑛𝑘𝑒𝑟 ′ 𝑠 𝑅𝑢𝑙𝑒 =
360
𝑑 = 8.5% = 0.085
𝑆 (𝑏𝑜𝑟𝑟𝑜𝑤𝑠) = ?

𝑃𝑟𝑜𝑐𝑒𝑒𝑑𝑠 = 𝑆 1 − 𝑑𝑡
200
3500 = 𝑆 1 − (0.085)( )
360

17
3500 = 𝑆 1 − 360

343
3500 = 𝑆 360

3500
343 =𝑆
360

𝑆 = 𝑅𝑀3673.47
PART A, QUESTION 2
4. DEC 2018 (RM1539.47)
Thomas received a 120-day promissory note with a simple interest of 4% per annum. The maturity
value of the note is RM1560. Find the face value of the note. (5 marks)
PART A, QUESTION 2
5. JUN 2018 (7.5%)
Belina borrowed RM7500 from Bank Z for 2 years to pay off some bills and catch up on car payments.
If the proceeds received were RM6375, find the discount rate that was charged. (5 marks)

Given that,
𝑆(𝑏𝑜𝑟𝑟𝑜𝑤𝑠) = 𝑅𝑀7500
𝑡 = 2 𝑦𝑒𝑎𝑟𝑠
𝑃𝑟𝑜𝑐𝑒𝑒𝑑𝑠 = 𝑅𝑀6375
𝑑 =?

𝑃𝑟𝑜𝑐𝑒𝑒𝑑𝑠 = 𝑆 1 − 𝑑𝑡
6375 = 7500 1 − 𝑑(2)
6375
7500
= 1 − 2𝑑

0.85 = 1 − 𝑑
2𝑑 = 1 − 0.85
0.15
𝑑= 2

𝑑 = 0.075 × 100%
𝑑 = 7.5%
PART B , QUESTION 2 (a)
6. JULY 2020 (RM 8053.69)
Amir received a promissory note at 4% simple interest rate on 5 July 2019. The note will mature on
13 October 2019. After holding the note for 60 days, he discounted the note at discount rate 6% and
received proceeds RM8,000. Find the maturity value of the note. (6 marks)

𝑟 = 4% = 0.04
5 July 2019 13 Oct 2019

𝑆(Maturity value)=?

60 days 𝑑 = 6% = 0.06
(Amir holding the Promissory Notes) 𝑃𝑟𝑜𝑐𝑒𝑒𝑑𝑠 = 𝑅𝑀8000
Based on the information, we can only use formula proceeds to find S. But we don’t have 𝑡2
Step 1: Find the number of days (𝒕𝟏 ) from 5 July to 13 Oct 2019 to find 𝒕𝟐
𝐸𝑥𝑎𝑐𝑡 𝑇𝑖𝑚𝑒
Use Banker’s Rule, 𝑡 = 360

Month No of days

5 July 31-5=26
𝑡2 = 100 − 60
Aug 31 40
𝑡2 =
360
Sept 30

13 Oct 13

Total 100

Step 2: Find S using formula proceeds

𝑃𝑟𝑜𝑐𝑒𝑒𝑑𝑠 = 𝑆 1 − 𝑑𝑡
40
8000 = 𝑆 1 − (0.06)(360)

1
8000 = 𝑆 1 − 150

149
8000 = 𝑆(150)

8000
149 =𝑆
150

S = 𝑅𝑀8053.69
PART B , QUESTION 2 (a)
7. DEC 2019 (RM10284.02)
Cindy received a 120-day promissory note with a simple interest rate of 6% per annum on 12 June
2018. She discounted the note at bank discount rate of 8% on 14 September 2018. The proceeds she
received were RM10,224.60. Find the maturity value of the note. (6 marks)
PART B , QUESTION 2 (a)
8. JUN 2019 (RM7566.20)
Amin received a promissory note at 6.85% simple interest rate on 3 June 2018. The note will mature
on 11 September 2018. After holding the note for 55 days, he discounted the note at discount rate of
7% and received proceeds of RM7500. find the maturity value of the note. (6 marks)

𝑟 = 6.85% = 0.0685
3 June 2018 11 Sept 2018

𝑆(Maturity value)=?

𝑑 = 7% = 0.07
55 days
𝑃𝑟𝑜𝑐𝑒𝑒𝑑𝑠 = 𝑅𝑀7500
Based on the information, we can only use formula proceeds to find S. But we don’t have 𝑡2
Step 1: Find the number of days (𝒕𝟏 ) from 3 June to 11 Sept 2018 to find 𝒕𝟐
𝐸𝑥𝑎𝑐𝑡 𝑇𝑖𝑚𝑒
Use Banker’s Rule, 𝑡 = 360

Month No of days

3 June 30-3=27
𝑡2 = 100 − 55
July 31 45
𝑡2 =
360
Aug 31

11 Sept 11

Total 100

Step 2: Find S using formula proceeds

𝑃𝑟𝑜𝑐𝑒𝑒𝑑𝑠 = 𝑆 1 − 𝑑𝑡
45
7500 = 𝑆 1 − (0.07)(360)

7500 = 𝑆 1 − 0.00875
7500 = 𝑆(0.99125)
7500
=𝑆
0.99125

S = 𝑅𝑀7566.20
PART B , QUESTION 2 (a)
9. DEC 2018 (RM10043.52)
Haris received a 110-day promissory note on 16 June 2018 with a simple interest rate of 5% per
annum. He discounted the note after 58 days at a discount rate of 3% and the proceeds received was
RM10000. Find the maturity value of the note. (6 marks)
PART B , QUESTION 2 (a)
10. JUN 2018 (RM25684.93)
Mellisa received a 160-days promissory note and the note was discounted at a rate of 6%. The
proceeds received were RM25000. Compute the maturity value of the note by using Banker’s Rule.
(6 marks)