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Promissory NotE

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Promissory NotE. GT10103 Business Mathematics Prepared by : Kasturi Rajoo Alfera Jausin. Learning Objectives. Explain the meaning and list the main features of a promissory note, Compute the face and maturity values of promissory notes,

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### Promissory NotE

GT10103

Business Mathematics

Prepared by : KasturiRajoo

AlferaJausin

Learning Objectives

Explain the meaning and list the main features of a promissory note,

Compute the face and maturity values of promissory notes,

Compute bank discounts and the proceeds obtained when a promissory note is discounted.

Compute simple interest rate that a bank earns when a promissory note is discounted.

What is Promissory Note??
• or notes in short are debt instruments (short-term debts).
• Negotiable instruments  signed document that promises the bearer a stated total of money at a future date/on demand.
• Written promise  one person/party  repay a loan/debt on specified future date  another person/party.
• Two types interest bearing notes and non-interest bearing notes.
The formula.

To find the maturity value :-

Maturity value = face value + interest due

To find the face value :-

S = P(1 + rt)

I = Prt, where P is face value

To find the bank discount :-

D = Sdt

To find the proceeds :-

P = S-D

P = S-Sdt

P = S(1-dt)

To find the equivalent simple interest rate :-

r = d/1 – dt

To find discount rate :-

r = r/1 + rt