Question
suppose the government passes a usury law that prohibits lending at more than 5% interest but normal market rates are much higher due to inflation.You
suppose the government passes a usury law that prohibits lending at more than 5% interest but normal market rates are much higher due to inflation.You have a customer a ms.Oslon who wants to borrow at 20% and can put up her $100000 store as collateral.Rather than refusing her request you decide to create a 5yr contract with the following terms.You hold title to the store and receive the right to sell her the store for $X at the end of 5yrs.If u decide to sell she must buy.In return you give her $80,000 in cash (the amount she wants to borrow ) and the right to buy the store from you for $X at the end of 5yrs.How can thus contract provide you with a 20% annual rate of return on the $80000?
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