On January $1,2020,$ Southwest Consulting made a loan to Softouch Co$.$ In exchange, Southwest Consulting received a $$135,000,4-$year note, bearing interest at $6\%$ payable annually each December $31.$ The market rate of interest is $8\%.$ Southwest Consulting has a December $31$ year$-$end while Softouch Co$.\text{'}$s year$-$end is December $31.$ Please make sure your final answer$($s$)$ are accurate to the nearest whole number.

a$)$ Calculate the present value of the note.

Marking:

Your answer was: $$30,867$

The correct answer was: $$126,057$

Present value of the note $=$ Present value of the principal $+$ Present value of the interest

$=$ Present value of $$135,000+$ Present value of $$8,100$ annually

$=$ $$126,057$

How are they calculating PV of $$135000$ and $$8100?$ On January $1,2020,$ Southwest Consulting made a loan to Softouch Co$.$ In exchange, Southwest Consulting received a $$135,000,4-$year note, bearing interest at $6\%$ payable annually each

December $31.$ The market rate of interest is $8\%.$ Southwest Consulting has a December $31$ year$-$end while Softouch Co$.\text{'}$s year$-$end is December $31.$ Please make sure your final answer$($s$)$ are

accurate to the nearest whole number.

a$)$ Calculate the present value of the note.

Present value $=$$$30,867$

Marking:

Your answer was: $$30,867$

The correct answer was: $$126,057$

Present value of the note $=$ Present value of the principal $+$ Present value of the interest

$=$ Present value $of$ $$135,000+$ Present value $of$ $$8,100$ annually

$=$$$126,057$

You will lose $2$ marks for this part.

b$)$ Calculate the amount of discount or premium on the note.

Discount$/$Premium $=$$$4,600$

Marking:

Your answer was: $$4,600$

The correct answer was: $$8,943$

Discount $=$ Face value of the note $-$ Present value of the note

$=$$$135,000-$$$126,057$

$=$$$8,943$

You will lose $1$ mark for this part.

c$)$ Complete the following schedule of note amortization