Fantasy Corp. has borrowed to invest in a project. The loan calls for a payment of...

Fantasy Corp. has borrowed to invest in a project. The loan calls for a payment of $20,000 every month for four years. The lender quoted Fantasy a rate of 9.60 percent with monthly compounding. At what rate would you discount the payments to find the amount borrowed by Fantasy Corp.? (Round to two decimal places.)

Expert Solution

Solution:

Given that Interest on loan, = 9.60% and frequency of compounding, = 12

We have to find the effective annual rate,

The effective annual rate, is given by:-

= 1.1003 - 1 = 0.1003 or 10.03%

Hence, the payments to the amount borrowed by Fantasy Corp. would be discounted at 10.03%

jeff jeffy answered 2 years ago

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