Asked by Kianna Sterlini on Jun 02, 2024
Verified
An assignable loan contract executed 3 months ago requires two payments of $3,200 plus interest at 9% from the date of the contract, to be paid 4 and 8 months after the contract date. The payee is offering to sell the contract to a finance company in order to raise urgently needed cash. If the finance company requires a 16% simple interest rate of return, what price will it be prepared to pay today for the contract?
Assignable Loan Contract
A loan agreement that allows the lender to transfer the loan to another party.
Simple Interest Rate
The simple interest rate is the percentage of an original sum of money (principal) charged for borrowing or paid for investment over a given period.
Urgently Needed Cash
Immediate requirement for liquid funds to cover expenses or investments.
- Apply the process of discounted cash flow to evaluate the current value of anticipated future payments.
Verified Answer
Learning Objectives
- Apply the process of discounted cash flow to evaluate the current value of anticipated future payments.
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