Company XYZ purchased equipment and gave a three-year note with maturity value of $12,006. The annual...
Company XYZ purchased equipment and gave a three-year note with maturity value of $12,006. The annual discount rate for the note was 14% discounted semi-annually. Then the note price should be $10,000. True or False
Homework Answers
Semi-annual discount rate = 14%/2 = 7%
Number of semi-annual periods = 3*2 = 6
Value of note = 12,006*PVF(7%, 6 years)
= 12,006*0.6663
= $8,000.10
Hence, the answer is FALSE
Note price should be $8000
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