How much could this loan be sold for?

Anonymous
timer Asked: Aug 17th, 2015

Question description

Assume a bank loan requires an interest payment of $85 per year and a principal payment of $1,000 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 8.5 percent interest rate? That is, what would be the present value of this loan?

b. Now, if interest rates on other similar quality loans are 10 percent, what would be the present value of this loan?

c. What would be the present value of the loan if the interest rate is 8 percent on similar quality loans?


Tutor Answer

(Top Tutor) Studypool Tutor
School: Purdue University
Studypool has helped 1,244,100 students
flag Report DMCA
Similar Questions
Hot Questions
Related Tags

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors