You are considering an investment that requires you to spend $150,000 today and receive $200,000 in 10 years. The cost of funds from a bank is 4.5% per year if you have collateral and 6.8% if you do not. Would you turn to an informal credit market to access funds at 8.3% if you did not have collateral? Support your answer with some computations.
You are considering an investment that requires you to spend $150,000 today and receive $200,000 in 10 years. The cost of funds from a bank is 4.5% per year if you have collateral and 6.8% if you do not. Would you turn to an informal credit market to access funds at 8.3% if you did not have collateral? Support your answer with some computations.
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
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Transcribed Image Text:You are considering an investment that requires you to spend $150,000 today and
receive $200,000 in 10 years. The cost of funds from a bank is 4.5% per year if you
have collateral and 6.8% if you do not. Would you turn to an informal credit market to
access funds at 8.3% if you did not have collateral? Support your answer with some
computations.
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