Suppose that you need to borrow $2000 from your local bank, which offers a discount rate of 7 % if you pay off your loan in 2 years. Answer the following six questions:

A. How much would you expect to receive as a proceeds?

B. What should be the loan amount if you need to get the entire $2000

C. What if you want to get $2000 right away 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. How much would the bank earn if they apply the new discount rate obtained in #3 above, and the loan remains as $2200?