RT is about to loan his granddaughter Cynthia $20,000 for 1 year. RT’s TVOM, based upon his current investment earnings, is 12%, and he has no desire to loan money for a lower rate. Cynthia is currently earning 8% on her investments, but they are not easily available to her, and she is willing to pay up to $2,000 interest for the 1-year loan. Solve, a. Should they be able to successfully negotiate the terms of this loan? b. If so, what range of pay backs would be mutually satisfactory? If not, how many dollars off is each person from reaching an agreement?
RT is about to loan his granddaughter Cynthia $20,000 for 1 year. RT’s TVOM, based upon his current investment earnings, is 12%, and he has no desire to loan money for a lower rate. Cynthia is currently earning 8% on her investments, but they are not easily available to her, and she is willing to pay up to $2,000 interest for the 1-year loan. Solve, a. Should they be able to successfully negotiate the terms of this loan? b. If so, what range of pay backs would be mutually satisfactory? If not, how many dollars off is each person from reaching an agreement?
Chapter16: Accounting Periods And Methods
Section: Chapter Questions
Problem 12DQ
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RT is about to loan his granddaughter Cynthia $20,000 for 1 year. RT’s TVOM, based upon his current investment earnings, is 12%, and he has no desire to loan money for a lower rate. Cynthia is currently earning 8% on her investments, but they are not easily available to her, and she is willing to pay up to $2,000 interest for the 1-year loan. Solve, a. Should they be able to successfully negotiate the terms of this loan? b. If so, what range of pay backs would be mutually satisfactory? If not, how many dollars off is each person from reaching an agreement?
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