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A bank has made a three-year $10 million loan that pays annual interest of 8 percent. The principal is due at the end of the
A bank has made a three-year $10 million loan that pays annual interest of 8 percent. The principal is due at the end of the third year. a. The bank is willing to sell this loan with recourse at an interest rate of 8.5 percent. What price should it receive for this loan?
b. The bank also has the option to sell this loan without recourse at a discount rat of 8.75 percent. What should it expect for selling this loan?
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