Your friend is asking a $55,000 loan from you with the following repayment schedule: End of...

Your friend is asking a $55,000 loan from you with the following repayment schedule: End of year 1 $ 0 End of year 2 $ 11,000 End of year 3 $ 22,000 End of year 4 $ 33,000 You demand at least 8% return on this loan deal. Answer to the following questions by showing your work using financial calculator keys. (a) Should you enter into this loan based on your PV (or NPV) analysis? (b) What is the expected rate of return (%) from this loan contract? Does this support your answer in (a)? (c) Given the repayment schedule, what will be the maximum loan amount you are willing to offer to the borrower for a break-even deal? I need a refresher on the financial calculator and how to input the problems step by step.

Expert Solution

The answers are as follows:

Please press EXE everytime you enter the data. In CASH function, we have written cash flows according to the END mode as 1,2.3.... in CASH function repesents just the number line. So, for 1 we have written initial cash outflow and for 2 we have written 0 as end of year 1 cash inflow is 0 and so on.

jeff jeffy answered 1 year ago

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