1. Notes Receivable Georgia CTAE Resource Network Instructional Resources Office Written by: Dr. Marilynn K. Skinner May 2009

2. Calculating the Maturity Value Maturity Value = Principal + Interest Interest = Principal X Interest Rate X Time (I = P X R X T)

3. Calculating the Maturity Value Example: Note Face Value: $1800.00 Interest Rate: 12% Issue Date: May 16 Due Date: August 14 Interest = Principal X Interest Rate X Time (I = P X R X T) P = 1800 R =.12 T = 60/365 I = 1800 X.12 X 60/365 I =35.51

4. Calculating the Maturity Value Maturity Value = Principal + Interest Maturity Value = $1800.00 + 35.51 Maturity value = $1835.51

5. Discounting Notes Receivable Step 1 Calculate discount period: Number of days in term of note – Number of days business held the note. Example: Previous note discounted on May 31. Term of Note = 90 days Held by business = 15 days Discount Period = 90-15 = 75 days

6. Discounting Notes Receivable Step 2 Calculate the discount amount Maturity Value X Discount Rate X Discount Period Maturity Value: 1835.51 Discount rate: 12.5% (given) Discount Period: 75/365 Amt of Discount = 1835.51X.125X75/365= $47.14

7. Discounting Notes Receivable Step 3 Calculate the proceeds Proceeds = Maturity Value – Discount Amount Proceeds = $1835.51 - $47.14 = $1788.37

8. You try it! Johnson Company accepted a note from Jane Richards. The terms of the note were as follows; Principal = $2000 Interest Rate = 8.5% Term of the note = 6 months After 1 month Johnson discounted the note to the bank at 9%. Calculate the maturity value of the note and the proceeds from the discount

9. Answer Maturity value = $2000 X.085 X 6/12 = $85.00 $2000 + $85.00 = $2085.00 Discount $2085 X.09 X 5/12 = 78.19 Proceeds $2085 - $78.19 = $2006.81