Question

x Your answer is incorrect. Try again. Novak Inc. loans money to John Kruk Corporation in the amount of $944,000. Novak accepts an 8% note due in 7 years with interest payable semiannually. After 2 years (and receipt of interest for 2 years), Novak needs money and therefore sells the note to Chicago National Bank, which demands interest on the note of 10% compounded semiannually. What is the amount Novak will receive on the sale of the note? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Amount received on sale of note LINK TO TEXT LINK TO TEXT LINK TO TEXT x Your answer is incorrect. Try again. Novak Inc. wishes to accumulate $1,534,000 by December 31, 2027, to retire bonds outstanding. The company deposits $236,000 on December 31, 2017, which will earn interest at 10% compounded quarterly, to help in the retirement of this debt. In addition, the company wants to know how much should be deposited at the end of each quarter for 10 years to ensure that $1,534,000 is available at the end of 2027. (The quarterly deposits will also earn at a rate of 10%, compounded quarterly.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.) Annuity of value of quarterly deposits Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT LINK TO TEXT LINK TO TEXT

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet. For detailed answer refer to the supporting sheet.

Answer Part 1) Time period remaining at the time of sale of note = 7 Years -2 Years = 5 Years Selling Price of the note = (Semiannual interest payment * Present value annuity (10,(10%/2))+(face value /(1+(10%/2))^10) = ((944000*4%)*((1-(1.05)^-10)/.05))+(944000/(1.05)^10) = (37760*7.72173)+(944000*.61391) = $ 871104 Thus the correct answer is $ 871104 Part 2) Amount to be accumulated with quarterly deposit = Total amount required -future amount of company deposit = 1534000 - (236000*(1.025)-40) = 1534000 - (236000*2.68506) = $ 900325.84 Amount of quarterly deposit = Amount to be accumulated with deposit / Future value annuity (2.5%,40) = 900325.84/((1.025)-40-1)/.025) = 900325.84/67.40255 = $ 13357 Thus the correct answer is $ 13357