An Investment in the Mezzogiorno Will Receive a Subsidized Loan

question 24

Multiple Choice

An investment in the Mezzogiorno will receive a subsidized loan of $12 million from the Italian government.The loan bears an interest rate of 7% in contrast to a market rate of 10%.The loan principal must be paid back in 8 years.What is the present value of the interest subsidy?

• A)$360,000
• B)$1.92 million
• C)$2.31 million
• D)$870,000

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