Google Answers: finance problem

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Q: finance problem ( No Answer, 0 Comments )

Question

Subject: finance problem
Category: Business and Money > Finance
Asked by: puica1-ga
List Price: $8.00

Posted: 12 Jan 2006 11:13 PST
Expires: 12 Jan 2006 13:20 PST
Question ID: 432530

Assume a bank loan requires an interest payment of $85 per year and a
principle payment of $1000 at the end of the loan's eight year life

a. How much could this loan be sold for to another bank if loans of
similar quality carried an 85 percent interest rate? That is, what
would be the present value of the loan?

b. Now, if interest rates on other  similar quality loans were 10
percent, what would be the present value of this loan?

c. Finally, what would be the present value of the loan if the
interest rate is 8 percent on similar quality loans?

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