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Wildhorse Inc
Wildhorse Inc. loans money to John Kruk Corporation in the amount of $880,000. Wildhorse accepts an 8% note due in 7 years with interest payable semiannually. After 2 years (and receipt of interest for 2 years), Wildhorse 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 Wildhorse will receive on the sale of the note?
Expert Solution
Semiannual;
r= 8%/ 2= 4%
i = 10%/ 2= 5%
n= 5 x2 = 10 periods
Amount Receivable on sale of the note :
= 880000* 4% PVAF (5%, 10) + 880000 PVIF (5%,10)
= 880000* 4%* 7.7217 + 880000* .6139
= 271803.84 + 540232
= 812035.84
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