Sovereign Debt Negotiations. A sovereign borrower is considering a $$100$ million loan for a $4-$year maturity. It will be an amortizing loan, meaning that the interest and principal payments will total, annually, to a constant amount over the maturity of the loan. There is$,$ however, a debate over the appropriate interest rate. The borrower believes the appropriate rate for its current cred standing in the market today is $8\%,$ but a number of international banks with which it is negotiating are arguing that is most likely $14\%,$ at the minimum $8\%.$ What impact do these different interest rates have on the prospective annual payments?

The annual payment, if the interest rate was $8\%,$ is $ $($Round to the nearest dollar.$)$

The annual payment, if the interest rate was $14\%,$ is $ $.($Round to the nearest dollar.$)$

What impact do these different interest rates have on the prospective annual payments? $($Round to the nearest dollar and select from the drop$-$down menus.$)$

The difference in the annual payment is $ $.$ This is a modest increase in the annual payment, given the short maturity of the obligation. However, if you are a $$ every cost reduction matters. If you are a sovereign $$ which is heavily indebted and in a position of a potential default, an interest rate increase of this amount could be critical.