A financier has made a loan of $12 million. The contract for the loan calls for payment of interest quarterly at a nominal annual rate of 8.1%, until the full principal is repaid in one lump sum at the end of 10 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 4.8% when compounded quarterly, what value would the Investor consider the remaining loan contract to be worth?

A financier has made a loan of $12 million. The contract for the loan calls for payment of interest quarterly at a nominal annual rate of 8.1%, until the full principal is repaid in one lump sum at the end of 10 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 4.8% when compounded quarterly, what value would the Investor consider the remaining loan contract to be worth?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 14P

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