Question
TBTF Bank makes a 10 year interest only loan to AFC Inc of $1,700,000.00. The interest rate on the loan is i (4) = 8.625%,
TBTF Bank makes a 10 year interest only loan to AFC Inc of $1,700,000.00. The interest rate on the loan is i(4) = 8.625%, and the payments will be made annually. TBTF reinvests the payments at an interest rate of i(26) = 6.125%. At maturity, what is TBTF Bank's annual ROI over the lifetime of the loan? (AFC does not default.)
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International Financial Markets And The Firm
Authors: Piet Sercu, Raman Uppal
1st Edition
1861523548, 978-1861523549
