1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Kryger [21]
3 years ago
10

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. At what amount 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?
Business
1 answer:
FromTheMoon [43]3 years ago
7 0

Answer:

1,000

and 1,000

Explanation:

The loan rate is 8,5%

85/1000 = 8.5

The market rate is 8.5

So the loan should be sold at 1,000 which is the face value of the loan, because there is no difference between the market rate and the loan rate.

This can be calculated anyway to prove it:

present value of the annuity of $85 during 8 years at 8.5% market rate

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\

C 85

time 8

rate 0.085

85 \times \frac{1-(1+0.085)^{-8} }{0.085} = PV\\

PV $479.3306

Present value of the maturity date:

\frac{Maturity}{(1 + rate)^{time} } = PV

Maturity 1000

time 8

rate 0.085

\frac{1000}{(1 + 0.085)^{8} } = PV

PV  $520.6694

Total present value

PV c $479.3306

PV m  $520.6694

Total $1,000.0000

You might be interested in
On December 1, 20X1, Money Co. gave Home Co. a $200,000, 11% loan. Money paid proceeds of $194,000 after the deduction of a $6,0
zysi [14]

Answer: <em>(C.) $2,005</em>

Explanation:

Given :

Money Co. made a cash outflow of $194,000 for the $200,000 loan Money gave to Home Co.  

The book value of the loan is $194,000.

The stated rate is 11%.

Hence they will receive an effective interest rate of 12.4% on cash outflow.  

∴

Income from the loan = Book value × Effective interest rate × No. of months of the year

= $194,000 × 0.124 × \frac{1}{2}

= $2,004.67

3 0
3 years ago
Is disease prevention by the government a pure public good or a private good? Explain
Lynna [10]
Public good are non-rivalry and non-excludable goods. People can benefit these goods without affecting and reducing its availability to others. Disease prevention by the government is purely public good since it is important to every individual and each person must not have any limitations in receiving these kind of prevention.
4 0
3 years ago
The sarbanes-oxley act created the ____ to protect the interests of investors and further"
UNO [17]

Answer:

federal laws

Explanation:

The sarbanes-oxley act is a Federal legislation that was passed in the US on 30th July 2002. to reform, protect the accounting and corporate financial sector which includes the interest of the investors. Note: an act consist of written laws and it is made by the legislative arm of the government.

4 0
3 years ago
Over the past 100 years or so, Binney and Smith's Crayola crayons have become household staples in more than 80 countries around
Vesna [10]

Answer: Maturity stage

Explanation:

Maturity stage tends to occur after growth and introduction stages. Maturity stage is known as one of the longest stages of product life cycle. Under this stage, the sales growth tends to decline; the organization tends to reach the highest point under a demand cycle; and thus advertising strategies tend to have a minimal impact on their sales growth.

4 0
3 years ago
Read 2 more answers
Why is the primary sector important to the South African economy?​
Fynjy0 [20]

Answer:

However, the economy has been characterised by a structural shift in output over the past four decades.

Since the early 1990s, economic growth has been driven mainly by the tertiary sector – which includes wholesale and retail trade, tourism and communications. Now South Africa is moving towards becoming a knowledge-based economy, with a greater focus on technology, e-commerce and financial and other services.

Among the key sectors that contribute to the gross domestic product and keep the economic engine running are manufacturing, retail, financial services, communications, mining, agriculture and tourism.

Explanation:

South Africa’s economy has traditionally been in the primary sectors – the result of a wealth of mineral resources and favourable agricultural conditions.

4 0
2 years ago
Other questions:
  • When is audio conferencing most successful?
    10·2 answers
  • - Safety (Security) Stock:
    7·1 answer
  • When an sbu has become a _____________, it is essential to either invest in it heavily to gain better market share, acquire comp
    5·1 answer
  • During the year, Anna rented her vacation home for 87 days, used it personally for 13 days, and left it vacant for 265 days. She
    8·1 answer
  • Business schools generally train students to follow ________ decision-making models
    11·1 answer
  • A contractor who agrees to undertake work without being under the direct control or direction of another and is personally respo
    10·1 answer
  • The Capitalist Mutual Fund's portfolio is valued at $77.7 million. The fund has liabilities of $5.5 million, and the investment
    15·1 answer
  • Dynamo Corporation manufactures toasters. Each toaster comes with a 5-year assurance-type warranty. The toasters sell for $50 ea
    7·1 answer
  • When a taxpayer rents a residence for part of the year, the residence is not eligible as a qualified residence for the home mort
    15·1 answer
  • Lisa is very picky about her peanut butter. she believes that the brand she buys tastes much better than any other brand on the
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!