Green Co. issued note receivable in January, 2017. Assuming the market interest rate is 10% per...

Green Co. issued note receivable in January, 2017. Assuming the market interest rate is 10% per annum, how much would Green Co. record as an interest revenue for 2017 if the terms of the note are that it would be a two-year, $120,000 note bearing interest at 8 percent annually? (The present value of $1 for one and two period at 10% is 0.90909 and 0.82645).

a. $9,267.

b. $11,584.

c. $0.

d. $9,600.

Expert Solution


Table values are based on:
Face Amount	$ 120,000
Interest Receipt($120,000*8%)	$ 9,600
Market Interest rate per period	5.00%
Cash Flow	Table Value(PV of 10% for 2 period)	Amount	Present Value
PV of Interest	1.73554	$ 9,600	$16,661
PV of Principal	0.82645	$ 120,000	$99,174
PV of Note			$115,835

Interest Revenue for 2017 =$115,835*10% =$11,584

So Option B is answer

ekkarill92 answered 2 years ago

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