# CMA Study Group

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## Short-Term Financing

• #### 1.  Short-Term Financing

Posted 7 days ago
A firm has been offered a 1-year loan by its commercial bank. The instrument is a discounted note with a stated interest rate of 9%. If the firm needs \$300,000 for use in the business, what should the face value of the note be?
The face amount of a loan with discounted (paid in advance) interest can be calculated as follows:  Total borrowings = Amount needed ÷ (1.0 – stated rate) = \$300,000 ÷ (1.0 – .09) = \$300,000 ÷ .91 = \$329,670

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Tayba Al-Mehdar
Analyst
Khobar
Saudi Arabia
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• #### 2.  RE: Short-Term Financing

Posted 7 days ago
Do you need logic behind it?

Actually the firm needs \$300,000 to use that is after paying the interest.

So as mentioned the interest is 9% and after that 9% paid the remaining amount must be \$300,000 to use.

So the \$300,000 must be 91% of the total amount as 9% is the amount of interest to be paid.  (100% - 9% = 91% or 0.91)

So if the amount \$300,000 is 91% of total amount, it means the full amount must be \$300,000 / 0.91 or 91%.

it would give you the amount of \$329,670.33.

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Ashvin Kulkarni
Accountant
Pune
India
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• #### 3.  RE: Short-Term Financing

Posted 6 days ago
Yes answer is (A) = 300,000 X 100/91 = 329,670.00

Thanks and regards.

Dinesh Kumar.T

Dubai,

United Arab Emirates

Mail to: dineshkumar.t@...

T +971 4 805 3820

F+971 4 8053701

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