**Saharan Debt Negotiations**The country of Sahara is negotiating a new loan agreement with a consortium of international banks. Both sides have a tentative agreement on the principal—$220 million. However, there are still wide differences of opinion on the final interest rate and maturity. The banks propose a shorter loan term of four years, while Sahara prefers a longer term of six years. The banks also suggest an interest rate of 12.248% per annum, but Sahara believes this is too high, proposing a rate of 11.753% instead. The initial values are shown in the table.### Questionsa. What would be the annual amortizing loan payments for the bank consortium's proposal? b. What would be the annual amortizing loan payments for Sahara's loan preferences? c. How much would annual payments drop on the bank consortium's proposal if the same loan was stretched from four to six years?### Calculation**a.** What would be the annual amortizing loan payments for the bank consortium's proposal? The annual amortizing loan payments for the bank consortium's proposal is $☐. (Round to the nearest dollar.) This exercise involves calculating the annual payments for different loan term scenarios and analyzing how changes in loan maturity and interest rate affect the payments.(Note: The text assumes a blank space or area to calculate and input results on the website.)

Data given:: Principal = $220 million Sahara's loan preference: n=6 years r=11.753% Bank…

a. What would be the annual amortizing loan payments for the bank consortium's proposal? p. What would be the annual amortizing loan payments for Sahara's loan preferences? c. How much would annual payments drop on the bank consortium's proposal if the same loan was stretched out from four to six years?

a. What would be the annual amortizing loan payments for the bank consortium's proposal? p. What would be the annual amortizing loan payments for Sahara's loan preferences? c. How much would annual payments drop on the bank consortium's proposal if the same loan was stretched out from four to six years?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Will doubling the interest rate on an investment cut the time it takes to earn the same amount of interest in half? Could you provide an example?
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H3. Show proper step by step calculation
What is the no arbitrage price of a risk-free investment that promises to pay $1,000 in one year? The risk-free interest rate is 3.5%. If you can purchase the investment for $950, do you have an arbitrage opportunity?
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The formula below tells us how to obtain the maturity value on a simple discount loan if we are given the proceeds, the discount rate, and the term. If a loan's annual simple discount rate is 7.56%, how many years would it take for the debt to double? (This is called the doubling time of a loan). Round your answer to the nearest tenth of a year. Hint: divide both sides of the equation by P. If M is twice as much as P, what should the fraction on the left-hand side equal?
Trestle Corporation wants to purchase a new finishing machine. They currently have an old machine, which is operable for five more years and is expected to have a zero-disposal value at the end of five years. If the company buys the new machine, the old machine will be sold now for $95,000 (book value is $75,000). The new machine will cost $635,000 and will be depreciated for tax purposes on a straight-line basis over its useful life of 5 years. The new machine will not have a salvage value and will not be sold after its useful life. An additional cash investment in working capital of $25,000 will be required if the new machine is purchased. The investment is expected to net $80,000 in before tax cash inflows during the first year of operation and $235,000 each additional year of use. These cash flows do not include depreciation and are recognized at the end of each year. The working capital investment will not be recovered at the end of the asset's life. The company's tax rate is 32%.
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What size loan must we take today with a 14% compound interest rate to have end-of-year payments of $1400, $1320, $1240, $1160, and $1080 for the next five years, respectively? In other words, if you take out a loan today, and after making all five payments, above, the loan is paid off, what is the value of that loan? Answer:
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