Teal Inc. loans money to John Kruk Corporation in the amount of $1,008,000. Teal accepts an 8% note due in 7 years with interest payable semiannually. After 2 years (and receipt of interest for 2 years), Teal 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 Teal 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 the sale of the note | 930161 |
Workings: | ||
Semi-annual interest | 40320 | =1008000*8%*6/12 |
X PV factor | 7.72173 | =(1-(1.05)^-10)/0.05 |
Present value of interest | 311340 | |
Principal | 1008000 | |
X PV factor | 0.61391 | =1/1.05^10 |
Present value of principal | 618821 | |
Amount received on the sale of the note | 930161 | =311340+618821 |
Teal Inc. loans money to John Kruk Corporation in the amount of $1,008,000. Teal accepts an...
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