Dubois Inc. loans money to John Kruk Corporation in the amount of $824,400. Dubo

Question

Dubois Inc. loans money to John Kruk Corporation in the amount of $824,400. 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 I answer to 0 decimal places, e.g. 458,581.) Dubois Inc. wishes to accumulate $1,335,000 by December 31, 2024, to retire bonds outstanding. The company deposits $204,400 on December 31, 2014, which will earn interest at 10% compounded quarterly, to help in the retirement of this I debt. In addition, the company wants to know how much should be deposited at the end of each quarter for 10 years to j ensure that $1,335,000 is available at the end of 2024. (The quarterly deposits will also earn at a rate of 10%, compounded quarterly.) (Round factor values to 5 decimal places, e.g. 1.15114 and final answer to O decimal placet, e.g. 458,581.)

Explanation / Answer

Interest payment for note: 824,400*0.08/2 = 32,976

Putting into calculator:

N = 8 (4 years left, 8 semiannual periods)

I = 5% (10% annual, 5% semiannual)

Payment = 32,976

Future value = 824,400

Present value = PV(5%,8,32976,-824400) = $771,117.27

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