Business and Money > Finance
12 Jan 2006 13:21 PST
12 Jan 2006 15:38 PST
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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