A company borrowed $10 million for five years from Atlantic Bank. The company pays Atlantic Bank a fixed annual rate of 8 percent and must pay back the $10 million loan at the end of the borrowing period. A year has passed since the loan was made and Atlantic Bank wants to sell the loan to Pacific Bank.

A. Consider the interest rate is now 7 percent, what is the present value of the loan?

B. What would be the present value of the loan be if we assume the company was paying the bank a rate of 4 percent every six months instead of 8 percent per year?