Wallo, Inc. is an import/export firm that is growing rapidly. The firm needs capital quickly to support this growth. Management is considering issuance of a 4 year interest-only note. The note would have a principal amount of $1,000 and pay 14% interest each year, with the principal amount due at the end of year 4. The notes are expected to have a market value today of $850 each.
a. What is the promised yield to maturity based on the terms suggested by the investment banker?