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What is the value of the loan

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Valuing a loan. A company borrowed $10 million for five years from Atlantic Bank. The company pays Atlantic Bank a fixed annual rate of 8 percent and must pay back the $10 million loan at the end of the borrowing period. A year has passed since the loan was made and Atlantic Bank wants to sell the loan to Pacific Bank.

a. If the interest rate is now 7 percent, what is the value of the loan?

b. What would be the value of the loan if the company was paying the bank 4 percent every six months instead of 8 percent per year?

My question is about part b; I also assumed that the interest rate was still 7% (per the previous question) and the answer provided has the same. So why is the 4% not used?

Reference no: EM133119713

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