Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A small business received a five-year $1,000,000 loan at a subsidized rate of 3% per year. The firm will pay 3% annual interest payment each

A small business received a five-year $1,000,000 loan at a subsidized rate of 3% per year. The firm will pay 3% annual interest payment each year and the principal at the end of five years. If market interest rates on similar loans are 6% per year, what is the NPV of the loan?

I know they use NPV to get an answer of 126,371, but how??

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial And Insurance Formulas

Authors: Tomas Cipra

2010th Edition

3790829013, 978-3790829013

More Books

Students also viewed these Finance questions

Question

=+How are they linked?

Answered: 1 week ago

Question

b. Why were these values considered important?

Answered: 1 week ago