Why the answer is b ?

An investment in the Mezzogiorno will receive a subsidized loan of $12 million from the Italian government. The loan bears an interest rate of 7% in contrast to a market rate of 10%. The loan principal must be paid back in 8 years. What is the present value of the interest subsidy? a) $360,000 b) $1.92 million c) $2.31 million d) $870,000 Ans: b Section: Net present value