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At retirement in December, you buy a specialtype of insurance policy called an immediate term annuity. This policy promises to pay the holder for the

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At retirement in December, you buy a specialtype of insurance policy called an immediate term annuity. This policy promises to pay the holder for the holder's hers) $25.000 per year for the next 26 years. Each payment is at the start of the year. (Hence the first payment will be very shortly after purchase of the policy) The appropriate discount rate is 2.97% per year, compounded annually. What is the value of this policy to the policy holder? You are a credit manager for Second Bank of Terlingua. Your bank is considering a loan to Arti Choke, a property developer in Terlingua. The structure of the loan is such that Arti would agree to pay back $16 million per year for 6 years, with the first payment in one year. Given the risk of Arti's company, you think that the appropriate interest rate should be 18% per year, compounded annually. Given this rate and the structure of the loan, how much should your bank lend to Arti

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