Assume you received note receivable of 5,000,000 carrying 12% nominal interest rate for a period of 6 years.Note pays interest semi annual. On the date of receipt, market rate for similar note is 10%.1. Is the note at premium/discount?2. Compute for interest income on the second year3. Compute for interest income on the third year year4. How much money will be received on the 6 year?

The premium on notes receivable is amortized by deducting a portion of the premium from the interest…

Assume you received note receivable of 5,000,000 carrying 12% nominal interest rate for a period of 6 years. Note pays interest semi annual. On the date of receipt, market rate for similar note is 10%.

Assume you received note receivable of 5,000,000 carrying 12% nominal interest rate for a period of 6 years. Note pays interest semi annual. On the date of receipt, market rate for similar note is 10%.

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money

Section: Chapter Questions

Problem 9.12E

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Question

Assume you received note receivable of 5,000,000 carrying 12% nominal interest rate for a period of 6 years.
Note pays interest semi annual. On the date of receipt, market rate for similar note is 10%.
1. Is the note at premium/discount?
2. Compute for interest income on the second year
3. Compute for interest income on the third year year
4. How much money will be received on the 6 year?

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