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AS 2053 (20)
Lecture 7

# Actuarial Science 2053 Lecture Notes - Lecture 7: Interest, Promissory Note

Department
Actuarial Science
Course Code
AS 2053
Professor
Steven Kopp
Lecture
7

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Example 1.5.1
What is the actual loan given out if \$1000 is due
at the end of 9 months, given the lending rate is
a simple discount rate of d = 6%? If the
borrower actually wishes to receive \$1000, what
size of loan should he ask for?
Solution to 1.5.1
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Note
Simple discount is sometimes used to
determine the proceeds of a promissory note
sold before maturity
Example 1.5.2
On May 9, 2015, Smith borrows \$3000 from
Jones and signs a promissory note due in 6
months at r = 8%. On July 30, Jones sells the
note to Brown who discounts the note at a
simple discount rate of d = 9%.
a) What price does Jones received for selling the
note?
b)What rate of return does Brown earn if the
note is held to maturity?
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