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 credit standing in the market today is 10%, but a number of international banks with which it is negotiating are arguing that is most likely 12%, at the minimum 10%. What impact do these different interest rates have on the prospective annual payments?

A. The annual payment, if the interest rate was 10%, is $ _________. (Round to the nearest dollar.)

The annual payment, if the interest rate was 12%, is $ ________. (Round to the nearest dollar.)

B. 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.)

C. 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 ______ (borrower or lender), every cost reduction matters. If you are a sovereign ______ (borrow or lender) which is heavily indebted and in a position of a potential default, an interest rate increase of this amount could be critical.