Question
An insurance company issued a $95 million one-year, zero-coupon note at 8 percent add-on annual interest (paying one coupon at the end of the year)
An insurance company issued a $95 million one-year, zero-coupon note at 8 percent add-on annual interest (paying one coupon at the end of the year) and used the proceeds plus $15 million in equity to fund a $110 million face value, two-year commercial loan at 10 percent annual interest. Immediately after these transactions were (simultaneously) undertaken, all interest rates went up 2 percent.
a. | What is the market value of the insurance companys loan investment after the changes in interest rates? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places. (e.g., 32.16))
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