Johnston River Investment Corporation issued a bill of exchange that has a face value of $200,000 which matures in 180 days

Finance Aug 10, 2020

Johnston River Investment Corporation issued a bill of exchange that has a face value of $200,000 which matures in 180 days. The interest for a similar loan in the market is 6%.:

If you were the lender, how much money should you give to the Johnson Corporation in exchange for the bill?

Expert Solution

Computation of the present value:-

FV = PV*(1+rate)^n

Here,

n = 180 periods (compounding daily)

Rate = 6%/365 = 0.0164% (compounding daily)

Substituting the values in formula:

$200,000 = PV*(1+0.0164%)^180

PV = $200,000 / 1.03003

= $194,169.36

Hence, the one should give the money to the Johnson Corporation in exchange for the bill = $194,169.36

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