Market Value of Loan Investment Assignment
February 19th, 2020
Hands Insurance Company issued a $90 million, 1-year, zero-coupon note at 8 percent add-on annual interest (paying one coupon at the end of the year). The proceeds were used to fund a $100 million, 2-year commercial loan at 10 percent annual interest. Immediately after these transactions were simultaneously closed, all market interest rates increased 1.5 percent (150 basis points).
a. What is the true market value of the loan investment and the liability after the change in interest rates? (with the method of solution) Get Finance homework help today