TBTF Bank makes a 3 year interest only loan to AFC Inc of $2,350,000.00. The interest rate on the loan is i(52) = 12.500%, and the payments will be made quarterly. TBTF reinvests the payments at an interest rate of i(26) = 14.250%. At maturity, what is TBTF Bank's annual ROI over the lifetime of the loan? (AFC does not default.) a. 11.289% b. 12.241% C. 13.601% d. 14.009% e. 12.377%
TBTF Bank makes a 3 year interest only loan to AFC Inc of $2,350,000.00. The interest rate on the loan is i(52) = 12.500%, and the payments will be made quarterly. TBTF reinvests the payments at an interest rate of i(26) = 14.250%. At maturity, what is TBTF Bank's annual ROI over the lifetime of the loan? (AFC does not default.) a. 11.289% b. 12.241% C. 13.601% d. 14.009% e. 12.377%
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 18P
Question
![TBTF Bank makes a 3 year interest only loan to AFC Inc of $2,350,000.00. The interest rate on the loan is i(52) = 12.500%, and the payments
will be made quarterly. TBTF reinvests the payments at an interest rate of i(26) = 14.250%. At maturity, what is TBTF Bank's annual ROI over
the lifetime of the loan? (AFC does not default.)
a. 11.289%
b. 12.241%
C. 13.601%
d. 14.009%
e. 12.377%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F53b4efae-7f30-41f4-8ba5-f2afa8be6dfa%2F2a440a9a-2bcf-4953-a6f9-767adb7924c0%2Fycyzo6a_processed.jpeg&w=3840&q=75)
Transcribed Image Text:TBTF Bank makes a 3 year interest only loan to AFC Inc of $2,350,000.00. The interest rate on the loan is i(52) = 12.500%, and the payments
will be made quarterly. TBTF reinvests the payments at an interest rate of i(26) = 14.250%. At maturity, what is TBTF Bank's annual ROI over
the lifetime of the loan? (AFC does not default.)
a. 11.289%
b. 12.241%
C. 13.601%
d. 14.009%
e. 12.377%
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