A Loan Is to Be Repaid with Semi-Annual Payments of $2000

question 28

Multiple Choice

A loan is to be repaid with semi-annual payments of $2000 over 8 years,first payment due in 6 months.The interest rate on the loan is j₂ = 10% for the first 3 years and j₂ = 6% thereafter.What is the amount of the loan? (answer to nearest dollar)

• A)$21,676
• B)$22,882
• C)$24,439
• D)$27,212

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Definitions:

Restructured Earnings

Earnings that have been adjusted to reflect the impact of significant changes or reorganizations within a company, often excluding non-recurring items to better represent ongoing profitability.

Abnormal Earnings

Profits that exceed or fall short of the average expected earnings by a company over a specific period, often highlighting unusual events or circumstances.

Equity Cost

The direct costs associated with issuing new equity, such as underwriting fees, or an investor's required rate of return for providing capital to a firm.

Transitory Components

Elements affecting financial statements or economic conditions that are expected to be temporary and not indicative of ongoing future performance.