Valix Finacc vol 1 Problem 12-17

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 12-17

Semiannual nominal interest (5,000,000 x 4%)                                                             200,000

Semiannual effective interest (5,000,000 x 5%)                                                 250,000

Difference                                                                                                                      50,000

Multiply by present value of annuity of 1 for 20 periods at 5%                                      12.462

Discount                                                                                                                      623,100

Face value                                                                                                                5,000,000

Discount                                                                                                                  (   623,100)

Purchase price                                                                                               4,376,900