Question

Assuming the market interest rate is 10% per annum, how much would Coronado Industries record as a note payable if the terms of the loan with a bank are that it would have to make one $128000 payment in two years

Answer 1

Answer: $105,785

Explanation:

Coronado would need to record the note at the present value of $128,000 given a rate of 10% and a 2 year maturity.

= 128,000 / ( 1 + 10%)²

= 128,000/ 1.21

= 105,785.12

= $105,785