Asked by Hannah Millican on May 30, 2024
Verified
An assignable loan contract executed three months ago requires two payments to be paid five and ten months after the contract date. Each payment consists of a principal portion of $1,800 plus interest at 5% on $1,800 from the date of the contract. The payee is offering to sell the contract to a finance company in order to raise cash. If the finance company requires a return of 10% simple interest, what price will it be prepared to pay today for the contract?
Assignable Loan Contract
A loan agreement that allows the lender to transfer or assign the loan to another party.
Finance Company
A financial institution that offers loans, leases, and other financial services to consumers and businesses.
- Engage the discounted cash flow principle to determine the present-day value of future monetary payments.
Verified Answer
DE
Learning Objectives
- Engage the discounted cash flow principle to determine the present-day value of future monetary payments.
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