You are a credit manager for Second Bank of Terlingua. Your bank is considering a loan...

 

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You are a credit manager for Second Bank of Terlingua. Your bank is considering a loan to Arti Choke, a property developer in Terlingua. The structure of the loan is such that Arti would agree to pay back $16 million per year for 5 years, with the first payment in one year. Given the risk of Arti's company, you think that the appropriate interest rate should be 16% per year, compounded annually. Given this rate and the structure of the loan, how much should your bank lend to Arti? Do not round at intermediate steps in your calculation. Report your answer in millions of dollars, rounded to three decimal places. Enter your answer without the $ symbol. You are a credit manager for Second Bank of Terlingua. Your bank is considering a loan to Arti Choke, a property developer in Terlingua. The structure of the loan is such that Arti would agree to pay back $16 million per year for 5 years, with the first payment in one year. Given the risk of Arti's company, you think that the appropriate interest rate should be 16% per year, compounded annually. Given this rate and the structure of the loan, how much should your bank lend to Arti? Do not round at intermediate steps in your calculation. Report your answer in millions of dollars, rounded to three decimal places. Enter your answer without the $ symbol.

Answer rating: 100% (QA)

To determine how much the bank should lend to Arti we need to calculate the ... View the full answer