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25 December, 04:50

Leaf Co. purchased from Oak Co. a $20,000, 8%, 5-year note that required five equal, annual year-end payments of $5,009. The note was discounted to yield a 9% rate to Leaf. At the date of purchase, Leaf recorded the note at its present value of $19,485. What should be the total interest revenue earned by Leaf over the life of this note? A. $5,560B. $8,000C. $5,045D. $9,000

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  1. 25 December, 06:23
    0
    A. $5,560

    Explanation:

    The computation of the total interest revenue is shown below:

    = Five-year payments received of note payable - present value of note payable

    where,

    Five-year payments received of note payable = Annual year payment received * number of years

    = $5,009 * 5 years

    = $25,045

    And, the present value of the note payable is $19,485

    Now put these values to the above formula

    So, the value would equal to

    = $25,045 - $19,485

    = $5,560
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Home » Business » Leaf Co. purchased from Oak Co. a $20,000, 8%, 5-year note that required five equal, annual year-end payments of $5,009. The note was discounted to yield a 9% rate to Leaf.
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