Dubois Inc. loans money to John Kruk Corporation in the amount of $830,800. Dubo

Question

Dubois Inc. loans money to John Kruk Corporation in the amount of $830,800. Dubois accepts an 8% note due in 6 years with interest payable semiannually. After 2 years (and receipt of interest for 2 years), Dubois 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 Dubois 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.)

Explanation / Answer

Amount received on sale of note: $777,104.

$830,800 x 8% x 6/12 = $33,232 x 6.46321* = $214,785
$830,800 x 0.67684 = $562,319
$214,785 + 562,319 = $777,104

*[(6years - 2years) x 2 = 4 years, 10%/2 = 5%]

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