TBTF Bank makes a 3 year interest only loan to AFC Inc of $2,350,000.00. The interest rate on the loan is ¡ (52) = 12.500%, and the paymentswill be made quarterly. TBTF reinvests the payments at an interest rate of ¡(26) = 14.250%. At maturity, what is TBTF Bank's annual ROI overthe lifetime of the loan? (AFC does not default.)a. 11.289%b. 12.241%C. 13.601%d. 14.009%e. 12.377%

First, we need to calculate the quarterly interest rate and the quarterly payments. The annual…

Answered: TBTF Bank makes a 3 year interest only…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 19P

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