Assume a bank loan requires an interest payment of $85 a year and principal payment of $1,000 at the end of the loan date/year life.

How much could this loan be sold for to another bank if the loans of similar quality care of a 8.5% interest rate that is what would be the present value of this loan?

Now if the interest rates on other similar quality loans are 10% what would be the present value of his loan?

What would be the present values of the loan if the interest rate is 8% in similar quality loans?