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Suppose that you need to borrow $2000 from your local bank, which offers a discount rate of 7 34 % if you pay off your
Suppose that you need to borrow $2000 from your local bank, which offers a discount rate of 7 34 % if you pay off your loan in 2 years. 1.) How much would you expect to receive as proceeds (C)? 2.) What should be the loan amount (FV)if you need to get the entire $2000? 3.) What if you want to get $2000 but you want to limit your loan to $2200 and pay it off in 3 years? Assume that the bank would agree but only if they change the discount rate. What would be the new discount rate (d)? 4.) How much would the bank earn (D) if the loan becomes $2200? 5.) What would be the term of discount (n) if the bank offers 3.87% discount rate? Proceeds and loan remain $2000 and $2367 respectively. 6.) How much would the bank get (D)? Keep the loan at $2367, term 4 years, and discount rate 3.87%
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