Please do it by type not pics. 1.$2,000,000 ten year note with 10% interest. The market...

Please do it by type not pics.

1.$2,000,000 ten year note with 10% interest. The market rate is 8.5%. The interest payments are made monthly and interest compounds monthly.

· How much cash was received in year 1?

· What was the amortized amount of the premium in year 2 - month 3?

· How much interest revenue was recognized in year 3 - month 4?

· What is the carrying value of the note at the end of year 4?

· What is the balance of the discount account correlated with this note at the end of year 3?

Expert Solution


	First we would calculate the present value of the note
	Monthly Interest rate	0.833333	10%/12
	Note Amount	2000000
	Monthly Market interest rate	0.708333	8.5%/12
	Monthly Interest Amount	16666.67

	Using the PV function in excel we get

	($2,201,636.17)

	Price of note is		$2,201,636.17


Payments	Interest Received	Interest Revenue on market value	Amortization of note	Discount/Premium on bond	Value of note	market value of note
0				201636.2	2000000	2201636
1	16666.67	15594.92	-1071.747129	200564.4	2000000	2200564
2	16666.67	15587.33	-1079.338671	199485.1	2000000	2199485
3	16666.67	15579.69	-1086.983987	198398.1	2000000	2198398
4	16666.67	15571.99	-1094.683457	197303.4	2000000	2197303
5	16666.67	15564.23	-1102.437465	196201	2000000	2196201
6	16666.67	15556.42	-1110.246397	195090.7	2000000	2195091
7	16666.67	15548.56	-1118.110642	193972.6	2000000	2193973
8	16666.67	15540.64	-1126.030592	192846.6	2000000	2192847
9	16666.67	15532.66	-1134.006642	191712.6	2000000	2191713
10	16666.67	15524.63	-1142.039189	190570.5	2000000	2190571
11	16666.67	15516.54	-1150.128634	189420.4	2000000	2189420
12	16666.67	15508.39	-1158.275378	188262.1	2000000	2188262
13	16666.67	15500.19	-1166.479829	187095.7	2000000	2187096
14	16666.67	15491.93	-1174.742394	185920.9	2000000	2185921
15	16666.67	15483.61	-1183.063486	184737.9	2000000	2184738
16	16666.67	15475.23	-1191.443519	183546.4	2000000	2183546
17	16666.67	15466.79	-1199.882911	182346.5	2000000	2182347
18	16666.67	15458.29	-1208.382081	181138.1	2000000	2181138
19	16666.67	15449.73	-1216.941455	179921.2	2000000	2179921
20	16666.67	15441.11	-1225.561457	178695.6	2000000	2178696
21	16666.67	15432.43	-1234.242517	177461.4	2000000	2177461
22	16666.67	15423.68	-1242.985068	176218.4	2000000	2176218
23	16666.67	15414.88	-1251.789546	174966.6	2000000	2174967
24	16666.67	15406.01	-1260.656388	173706	2000000	2173706
25	16666.67	15397.08	-1269.586038	172436.4	2000000	2172436
26	16666.67	15388.09	-1278.578939	171157.8	2000000	2171158
27	16666.67	15379.03	-1287.635539	169870.2	2000000	2169870
28	16666.67	15369.91	-1296.756291	168573.4	2000000	2168573
29	16666.67	15360.73	-1305.941648	167267.5	2000000	2167267
30	16666.67	15351.48	-1315.192068	165952.3	2000000	2165952
31	16666.67	15342.16	-1324.508012	164627.8	2000000	2164628
32	16666.67	15332.78	-1333.889944	163293.9	2000000	2163294
33	16666.67	15323.33	-1343.338331	161950.5	2000000	2161951
34	16666.67	15313.82	-1352.853644	160597.7	2000000	2160598
35	16666.67	15304.23	-1362.436357	159235.3	2000000	2159235
36	16666.67	15294.58	-1372.086948	157863.2	2000000	2157863
37	16666.67	15284.86	-1381.805898	156481.4	2000000	2156481
38	16666.67	15275.08	-1391.593689	155089.8	2000000	2155090
39	16666.67	15265.22	-1401.450811	153688.3	2000000	2153688
40	16666.67	15255.29	-1411.377755	152276.9	2000000	2152277
41	16666.67	15245.29	-1421.375014	150855.6	2000000	2150856
42	16666.67	15235.23	-1431.443087	149424.1	2000000	2149424
43	16666.67	15225.09	-1441.582475	147982.5	2000000	2147983
44	16666.67	15214.88	-1451.793684	146530.7	2000000	2146531
45	16666.67	15204.59	-1462.077223	145068.7	2000000	2145069
46	16666.67	15194.24	-1472.433603	143596.2	2000000	2143596
47	16666.67	15183.81	-1482.863341	142113.4	2000000	2142113
48	16666.67	15173.3	-1493.366957	140620	2000000	2140620


	How much cash was received in year 1?		200000.00
	What was the amortized amount of the premium in year 2 - month 3		1183.06
	How much interest revenue was recognized in year 3 - month 4?		15369.91
	What is the carrying value of the note at the end of year 4?		2140620.00
	What is the balance of the discount account correlated with this note at the end of year 3?		157863.17

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