A non-interest-bearing five-year note for $2800.00 issued november 1, 2013, is discounted june 1, 2014, at 4.1% compounded monthly. find the compound discount

~ Period from the date of discounting to maturity of note :

- Maturity date = November 1,2013 + five years = November 1, 2018

- Discounting date = June 1, 2014

- Period between June 1, 2014 to November 1, 2018 :

= 4 years and five months

= 4.4167 years

~ Present value of note on the day of discounting:

(Since the discount rate is compounded monthly, the discount rate will be divided by 12, and maturity will be multiplied by 12)

= Future value / (1+r)ⁿ

where,

Future value = Maturity value of note

r = Discount rate

n = Time to maturity

= $2800 / (1 + 0.041/12)^4.4167x12

= $2800 / (1.0034167)⁵³

= $2800 / 1.198145

= $2,336.95

~ Compound discount:

= Future value - Present value

= $2800.00 - $2,336.95

= $463.05

Answer: Compound discount = $463.05