The Export-Import Bank of the United States subsidizes the foreign purchase of certain U.S. manufactured goods by offering to finance the foreign purchases at below-market interest rates. For example, suppose a foreign commercial airline agrees to purchase four commercial jet airplanes from Boeing for $400 million. Assume the foreign airline can borrow the $400 million at 6 percent using private financing to be repaid in equal annual payments over 15 years. If the U.S. Export-Import Bank offers to loan the $400 million at 4 percent, to be repaid in equal annual installments over 15 years, what is the present-value-equivalent amount of this subsidy to the foreign airline? Note : Please answer it using the Present capital values of Annuity
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The Export-Import Bank of the United States subsidizes the foreign purchase of certain U.S. manufactured goods by offering to finance the foreign purchases at below-market interest rates. For example, suppose a foreign commercial airline agrees to purchase four commercial jet airplanes from Boeing for $400 million. Assume the foreign airline can borrow the $400 million at 6 percent using private financing to be repaid in equal annual payments over 15 years. If the U.S. Export-Import Bank offers to loan the $400 million at 4 percent, to be repaid in equal annual installments over 15 years, what is the present-value-equivalent amount of this subsidy to the foreign airline?
Note : Please answer it using the Present capital values of
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