Problem #7: A financier has made a loan of $15 million. The contract for the loan calls for payment of interest quarterly at a nominal annual rate of 8.7%, until the full principal is repaid in one lump sum at the end of 15 years. After 3 years have gone by, immediately after the quarterly payment, the financier decides to sell the asset to an investor. If the investor values these cash flows with a nominal annual rate of 7.7% when compounded quarterly, what value would the investor consider the remaining loan contract to be worth?

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Problem #7: A financier has made a loan of $15 million. The contract for the loan calls for payment of interest quarterly at a
nominal annual rate of 8.7%, until the full principal is repaid in one lump sum at the end of 15 years. After 3
years have gone by, immediately after the quarterly payment, the financier decides to sell the asset to an investor.
If the investor values these cash flows with a nominal annual rate of 7.7% when compounded quarterly, what
value would the investor consider the remaining loan contract to be worth?
Transcribed Image Text:Problem #7: A financier has made a loan of $15 million. The contract for the loan calls for payment of interest quarterly at a nominal annual rate of 8.7%, until the full principal is repaid in one lump sum at the end of 15 years. After 3 years have gone by, immediately after the quarterly payment, the financier decides to sell the asset to an investor. If the investor values these cash flows with a nominal annual rate of 7.7% when compounded quarterly, what value would the investor consider the remaining loan contract to be worth?
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