An Assignable Loan Contract Executed 3 Months Ago Requires Two

question 27

Short Answer

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?

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Definitions:

DuPont Cellophane Case

The antitrust case brought against DuPont in which the U.S. Supreme Court ruled (in 1956) that while DuPont had a monopoly in the narrowly defined market for cellophane, it did not monopolize the more broadly defined market for flexible packaging materials. It was thus not guilty of violating the Sherman Act.

Relevant Market

The market segment in which a company competes, defined by its products, customers, and geographic area.

Structure Versus Behavior

A distinction in competition policy and economic regulation focusing on the organization and arrangements of firms (structure) versus their actual conduct (behavior) in the market.

Rule Of Reason

The principle that not all actions deemed as restrictive of trade are illegal, depending on whether they are unreasonable restraints.