Saharan Debt Negotiations. The country of Sahara is negotiating a new loan agreement with a consortium of international banks. Both sides have a tentative agreement on the principallong dash$220 million. But there are still wide differences of opinion on the final interest rate and maturity. The banks would like a shorter loan, four years in length, while Sahara would prefer a long maturity of six years. The banks also believe the interest rate will need to be 12.253 per annum, but Sahara believes that is too high, arguing for 11.746

Loan 0

Principal $220,000,000

Interest rate 12.253%

Maturity (years) 6

Payments 1 2 3 4 5 6

Interest 26,956,600 23,656,006 19,950,990 15,791,999 11,123,406 5,882,771

Principal 26,937,028.45 30,237,622.45 33,942,638.45 38,101,629.45 42,770,222.45 48,010,857.45

Total 53,893,628.45 53,893,628.45 53,893,628.45 53,893,628.45 53,893,628.45 53,893,628.45

a. What would be the annual amortizing loan payments for the bank consortium's proposal?

b. What would be the annual amortizing loan payments for Sahara's loan preferences?

c. How much would annual payments drop on the bank consortium's proposal if the same loan was stretched out from four to six years?