PROMISSORY

NOTES
>A written promise signed by the
maker or debtor to pay a certain
sum of money on demand or at a
fixed and determinable future date,
either to the bearer or to the order
of a designated person.
>A negotiable financial paper
>Either interest bearing or non-
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interest bearing.
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1. Face Value (FV) – The amount borrowed.
2. Date of Note (Dn) – Date the note was
written.
3. Maturity Date – (Md) – Promised date of
payment/due date.
4. Interest rate (r) – The simple interest rate.
5. Lender/Payee – Person to whom payment is
due.
6. Maker – The borrower. 5
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 NOTATIONS:
FV = Face Value Dn = Date of note
MV = Maturity Value Dd = Discounting date
I = Interest Md = Maturity date
tn = Term of note td = Term of discount
r = Interest rate Bd = Bank discount
Pro = Proceeds
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 FORMULAS:
I = FV x r x tn
MV = FV + I or FV(1+(rxtn))
FV = MV-I
Md = Dn+tn
Td = Md-Dd
Bd = MV x d x td
Pro = MV-Bd or MV(1-(dxtd))
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 ILLUSTRATIVE EXAMPLE:

1. A merchant has a note for 12,500

pesos dated March 17, 2018. The note is due in
120 days with interest at 11 1/8%. If he sells the
note on May 6, 2018 at a bank charging a discount
rate of 10 5/8%. Find the I, MV, Md, td, Bd and
Proceeds.
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ILLUSTRATIVE EXAMPLE:

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 ILLUSTRATIVE EXAMPLE:

2. A note of 15,200 dated November 27, 2017 will

mature in 90 days with interest at 12 ¾%. The note
is discounted on January 6, 2018 at a discount rate
of 11 ¼%. What are the proceeds?

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 ILLUSTRATIVE EXAMPLE:

3. On June 26, 2017 Marian obtain a loan from a

bank to be repaid on December 18, 2017. If the
bank charges 11 7/8% simple discount, what must
be the face value of a non-interest bearing note
that will have a proceeds o 15, 000 pesos?

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