TBTF Bank makes a 7 year interest only loan to AFC Inc of $4,300,000.00. The interest rate on the loan is i(4) = 8.125%, andthe payments will be made annually. TBTF reinvests the payments at an interest rate of i(4) = 5.250%. At maturity, what isTBTF Bank's annual ROI over the lifetime of the loan? (AFC does not default.)a. 8.012%O b. 7.778%O c. 7.856%O d. 7.545%O e. 7.701%

Loan amount=4300000.00Period=7 yearsInterest rate=8.125%Reinvestment rate=5.25%

Answered: TBTF Bank makes a 7 year interest only…

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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Miller borrows $320,000 to be paid off in three years. The loan payments are semiannual with the first payment due in six months, and interest is at 8% What is the amount of each payment? (FV of $1. PV of $1. FVA of $1, and PVA of $1). (Use appropriate factor(s) from the tables provided.) Multiple Choice $82,467 $76,800 $77,533 $61,044
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