2. 外语
  3. A note receivable is a negotiable instrument, which means it is readily transferable from one business or person to another and

A note receivable is a negotiable instrument, which means it is readily transferable from one business or person to another and

admin2011-01-26  92
问题     A note receivable is a negotiable instrument, which means it is readily transferable from one business or person to another and may be sold for cash. To get cash quickly, payees sometimes sell a note receivable to another party before the note matures. The payee endorses the note and hands it over to the note purchaser--often a bank--who collects the maturity value of the note at the maturity date.
    Selling a note receivable before maturity is called discounting a note receivable because the payee of the note receives less than its maturity value. This lower price decreases the amount of interest revenue the payee earns on the note. Giving up some of this interest is the price the payee is willing to pay for the convenience of receiving cash early.
    Assume that the maturity date of the Dorman note is January 18, 1995 and that General Electric discounts the Dorman note at First City National Bank on December 9, 1994. The discount period--which is the number of days from the date of discounting to the date of maturity (this is the period the bank will hold the note) -- is 40 days; 22 days in December, and 18 days in January. Assume the bank applies a 12 percent annual interest rate in computing the discount value of the note. The bank will want to use a discount rate that is higher than the interest rate on the note in order to increase its earnings. GE may be willing to accept this higher rate in order to get cash quickly. The discounted value, called the proceeds, is the amount that GE receives from the bank. The proceeds are computed as follows:
    General Electric’s entry to record discounting the note is:
    Dec. 9, 1994cash    $ 15 170
    Note receivable     Dorman Builders     $ 15 000
    Interest Revenue    $ 170
    TO RECORD DISCOUNTING NOTE RECEIVABLE
    At maturity the bank collects 15 375 from the maker of the note, earning 205 of interest revenue.
    Observe two points in the above computation: (1) The discounting is computed on the maturity value of the note (principal plus interest) rather than on the original principal amount, and (2) the discounting period extends backwards from the maturity date (January 18, 1995) to the date of discounting (December 9, 1994).
What is called discounting a note receivable?
选项 A、Purchasing a note receivable.
B、Receiving less money than the principal amount of the note.
C、Selling a note receivable before maturity.
D、Giving up some of tile interest revenue of the note.
答案C
解析
转载请注明原文地址:https://kaotiyun.com/show/B8Yd777K
0

初级（银行综合类）

原金融专业英语（FECT）

金融英语（FECT）

相关试题推荐
随机试题
最新回复(0)