An insurance company issued a $110 million one-year, zero-coupon note at 7 percent add-on annual interest (paying one coupon at the end of the year) and used the proceeds plus $30 million in equity to fund a $140 million face value, two-year commercial loan at 9 percent annual interest. Immediately after these transactions were (simultaneously) undertaken, all interest rates went up 1.7 percent.
a. What is the market value of the insurance company’s loan investment after the changes in interest rates? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places. (e.g., 32.16))
Market value of the loan investment $ million