How much will they lend the company

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Reference no: EM132023642

A start-up company is willing to make payments of $700 per year for 4 years. A bank estimates that the company will go out of business in any one year with probability .02.

a) If the bank wants its expected rate of return to be 4%, how much will they lend the company?

b) If the company ends up making all the payments, what interest rate were they charged?

Reference no: EM132023642

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