TBTF Bank makes a 3 year interest only loan to AFC Inc of $2,350,000.00. The interest rate on the loan is i(52) = 12.500%, and the payments will be made quarterly. TBTF reinvests the payments at an interest rate of i(26) = 14.250%. At maturity, what is TBTF Bank's annual ROI over the lifetime of the loan? (AFC does not default.) a. 11.289% b. 12.241% C. 13.601% d. 14.009% e. 12.377%
TBTF Bank makes a 3 year interest only loan to AFC Inc of $2,350,000.00. The interest rate on the loan is i(52) = 12.500%, and the payments will be made quarterly. TBTF reinvests the payments at an interest rate of i(26) = 14.250%. At maturity, what is TBTF Bank's annual ROI over the lifetime of the loan? (AFC does not default.) a. 11.289% b. 12.241% C. 13.601% d. 14.009% e. 12.377%
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 18P
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