Problem 1. An investor is considering a business opportunity with the following predicted cash flows.
Time 0 1 2 3 4
Predicted Cash Flow 2200 6500 8500 X 6400
The investor could earn 10% compounded quarterly on an investment of similar risk.
If the investor is willing to pay $26,000 for this business opportunity, what is her expected cash flow at time 3 (to the nearest dollar). Please show your work, including a timeline.
Problem 2. As corporate treasurer, you are negotiating an amortized loan to fund the purchase of a new office complex in Grand Island, Nebraska. The complex will cost $2.135 million. Your loan is for 70% of the purchase price and will have a term of 15 years with 180 payments. If your monthly payment is $19,015, what is the Effective Annual Rate on this loan (to 4 decimal places)?