Promissory NotE

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# Promissory NotE - PowerPoint PPT Presentation

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

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1. Promissory NotE GT10103 Business Mathematics Prepared by : KasturiRajoo AlferaJausin

2. 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.

3. 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.

4. Example Promissory Note.

5. The features in PN.

6. 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

7. 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