The Implementation

B. If the levels of borrowing be 45 units for 6 months and 50 units for the other 6 months, n/12 = 1 if the demand loan component is set below 45 units; n/12 = ½ if the demand loan component is set at 45 units or above, but below 50 units.
Let a = 10% p.a. and a+b = 12% p.a. Then n/12 = 10/12 as per our formula. But, n/12 can be equal to only 1, ½, or 0.
We shall choose the next lower permissible value for n/12, viz. ½. Further, as n/12 = ½ for all values of the demand loan from 45 units and above but less than 50 units, we shall select the lowest permissible value, viz. 45 units as the desired value of x0.