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A financier has made a loan of S5 million. The contract for the loan calls for payment of interest quarterly at a nominal annual rate of 6.6%, 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 3.5% when compounded quarterly, what value would the investor consider the remaining loan contract to be worth?

A financier has made a loan of S5 million. The contract for the loan calls for payment of interest quarterly at a nominal annual rate of 6.6%, 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 3.5% when compounded quarterly, what value would the investor consider the remaining loan contract to be worth?

Advanced Engineering Mathematics
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
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Problem #7: A financier has made a loan of $5 million. The contract for the loan calls for payment of interest quarterly at a nominal annual rate of 6.6%, 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 3.5% when compounded quarterly, what value would the investor consider the remaining loan contract to be worth? Problem #7: Answer in millions of dollars, correct to 3 decimals.
Transcribed Image Text:Problem #7: A financier has made a loan of $5 million. The contract for the loan calls for payment of interest quarterly at a nominal annual rate of 6.6%, 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 3.5% when compounded quarterly, what value would the investor consider the remaining loan contract to be worth? Problem #7: Answer in millions of dollars, correct to 3 decimals.
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