Question

Negotiating the Rate.A sovereign borrower is considering a $100 million loan for a 4​-year maturity. It will be an amortizing​ loan, meaning that the interest and principal payments will​ total, annually, to a constant amount over the maturity of the loan. There​ is, however, a debate over the appropriate interest rate. The borrower believes the appropriate rate for its current credit standing in the market today is 8​%, but a number of international banks with which it is negotiating are arguing that is most likely 13​%, at the minimum 8​%. What impact do these different interest rates have on the prospective annual​ payments?

The annual​ payment, if the interest rate was 8​%, is ___ (Round to the nearest​ dollar.)

The annual payment, if the interest rate was 13%, is ___ (Round to the nearest dollar)

The difference in annual payment? ____

Answer 1

	Annual payment of interest at 8% interest rate					=	$8 million		8000000
	Annual payment of interest at 13% interest rate					=	$13 million		13000000
	Difference in the annual payment between two rates					=	$5 million		5000000