Shin Company Has a Loan Agreement That Provides It with Cash

question 137

Short Answer

Shin Company has a loan agreement that provides it with cash today.The company must repay this loan in 4 years with $25,000.Shin agrees to a 6% interest rate.The present value factor for 4 periods,6% is 0.7921.What is the amount of cash that Shin Company receives today?

---

Definitions:

Holding-Period Return

The total return received from holding an asset or portfolio of assets over a period of time, typically expressed as a percentage.

Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profits.

Nominal Rate of Interest

The rate of interest before adjustment for inflation, reflecting the rate at which money will grow over time without considering the purchasing power of that money.

Real Rate of Interest

The interest rate adjusted for inflation, reflecting the true cost of borrowing and the real yield to lenders or investors.