Meaning that the interest and principal payments

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A soverign borrower is considering a $100 million loan for a 4-year maturity. It will be an amortizing loan, meaning that the interest and principal payments will total, annually, to a constant amount over the maturity of the loan. There is, however, a debate over the appropraite interest rate. The borrower believes the appropriate rate for its current credit standing in the market today is 10%, but a number of international banks with which it is negotiating are argueing that is most likely 12%, at the minimum 10%. What impact do these different interest rates have on the prospective annual payments?

Reference no: EM131332496

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