Question
You just starting a loaning firm and negotiating to make a 7-year loan of SAR24100 to AlKohbar Bakery which will pay you as follows: SAR
You just starting a loaning firm and negotiating to make a 7-year loan of SAR24100 to AlKohbar Bakery which will pay you as follows:
SAR 2,500 at the end of Year 1,
SAR 5,000 at the end of Year 2,
SAR 7,500 at the end of Year 3,
Plus a fixed but currently unspecified cash flow, X, at the end of each year from Year 4 through Year 7.
AlKhobar Bakery is essentially riskless, so you are confident the payments will be made. For such loan, you require 8% as an appropriate rate of return (compounded annually). What cash flow must the investment provide at the end of each of the final 4 years, that is, what is X? (See the time line)
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