Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

If I buy a distressed loan at 50% discount to original face value $1,000,000 and then work with the obligor to refinance it at 80%

If I buy a distressed loan at 50% discount to original face value $1,000,000 and then work with the obligor to refinance it at 80% of original face value two years from now when the economy is better and the original loan paid 10% p.a. of face value but I was a nice guy and dropped that to 6% p.a. of face value, what is my percentage return on my original $500,000 investment? (The refinancing gets me $800,000 from the bank and I now tear up the original loan so I am out at $800,000 with the original borrower now owing $800,000 to a new bank). Click on the calculator link to solve answer. (5 points). For partial credit show me your inputs.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Accounting questions