question archive Consider a 5% fixed-rate, 5-year, interest-only, non-prepayable loan of $100M
Consider a 5% fixed-rate, 5-year, interest-only, non-prepayable loan of $100M
Subject:FinancePrice:2.86 Bought3
Consider a 5% fixed-rate, 5-year, interest-only, non-prepayable loan of $100M. If the market interest rate remains at 5% after origination, the market value of the loan after 3 years is:
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The market value of the loan after years = $101,666,666.67
Step-by-step explanation
FV = PV(1+(r/n))
PV = $100M
r =5% or 0.05
n = 3 years
Therefore
FV =100000000(1+(0.05/3))3
FV = 101,666,666.67
