A financier has made a loan of $8 million. The contract for the loan calls for...

 

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A financier has made a loan of $8 million. The contract for the loan calls for payment of interest quarterly at a nominal annual rate of 7.6%, until the full principal is repaid in one lump sum at the end of 14 years. After 3 years have gone by, immediately after the quarterly payment, the financier decides to sell the asset to an investor. If the investor values these cash flows with a nominal annual rate of 5% when compounded quarterly, what value would the investor consider the remaining loan contract to be worth? A financier has made a loan of $8 million. The contract for the loan calls for payment of interest quarterly at a nominal annual rate of 7.6%, until the full principal is repaid in one lump sum at the end of 14 years. After 3 years have gone by, immediately after the quarterly payment, the financier decides to sell the asset to an investor. If the investor values these cash flows with a nominal annual rate of 5% when compounded quarterly, what value would the investor consider the remaining loan contract to be worth?

Answer rating: 100% (QA)

SOLUTION Original loan amount 8 million Interest rate 76 per year compounded quarterly 176 per ... View the full answer