Fight Finance

Courses  Tags  Random  All  Recent  Scores

Scores
keithphw$6,001.61
Carolll$1,512.43
Zin$1,502.43
Visitor$1,268.61
Visitor$1,251.28
cuiting$1,229.70
Visitor$1,198.33
Jade$1,145.80
Skywalke...$1,070.00
mm11$1,050.33
ninalee$1,039.70
Yuan$1,033.33
Visitor$1,024.70
Visitor$996.00
Visitor$985.61
zy$939.70
victor$934.70
Emma Lu$910.00
Doris$889.70
Visitor$840.00
 

Question 155  inflation, real and nominal returns and cash flows, Loan, effective rate conversion

You are a banker about to grant a 2 year loan to a customer. The loan's principal and interest will be repaid in a single payment at maturity, sometimes called a zero-coupon loan, discount loan or bullet loan.

You require a real return of 6% pa over the two years, given as an effective annual rate. Inflation is expected to be 2% this year and 4% next year, both given as effective annual rates.

You judge that the customer can afford to pay back $1,000,000 in 2 years, given as a nominal cash flow. How much should you lend to her right now?




Copyright © 2014 Keith Woodward