Saharan Debt Negotiations.
The country of Sahara is negotiating a new loan agreement with a consortium of international banks. Both sides have a tentative agreement on the Principal—$220220 million. But there are still wide differences of opinion on the final interest rate and maturity. The banks would like a shorterloan, four years inlength, while Sahara would prefer a long maturity of six years. The banks also believe the interest rate will need to be 12.255% perannum, but Sahara believes that is too high, arguing for 11.754%.
Loan |
0 |
|||||||
Principal |
$220,000,000 |
|||||||
Interest rate |
12.255% |
|||||||
Maturity (years) |
6 |
|||||||
Payments |
1 |
2 |
3 |
4 |
5 |
6 |
||
Interest |
26,961,000 |
23,660,034 |
19,954,534 |
15,794,926 |
11,125,557 |
5,883,958 |
||
Principal |
26,935,668.17 |
30,236,634.17 |
33,942,134.17 |
38,101,742.17 |
42,771,111.17 |
48,012,710.17 |
||
Total |
53,896,668.17 |
53,896,668.17 |
53,896,668.17 |
53,896,668.17 |
53,896,668.17 |
53,896,668.17 |
||
What would be the annual amortizing loan payments for the bankconsortium’s proposal?
What would be the annual amortizing loan payments forSahara’s loanpreferences?
How much would annual payments drop on the bankconsortium’s proposal if the same loan was stretched out from four to sixyears?
The correct answers are
72,820,946.17
53,137,369.36
18,924,278.00
Please show me the steps to get these correct answers,
Thank you
a. The annual amortizing loan payments for the bankconsortium’s proposal
Annual Loan Payment = Loan Amount / PVAF (12.255%, 4)
Annual Loan Payment = $220000000 / 3.021109
Annual Loan Payment = $72820946.17
b. the annual amortizing loan payments forSahara’s loanpreferences
Annual Loan Payment = Loan Amount / PVAF (11.754%, 6)
Annual Loan Payment = $220000000 / 4.140212484
Annual Loan Payment = $53137369.36
c. Annual payments if Bank consortium loan stretched to 6 years
Annual Loan Payment = Loan Amount / PVAF (12.255%, 6)
Annual Loan Payment = $220000000 / 4.081884975
Annual Loan Payment = $5389668.17
Annual Loan Payment will drop by = $72820946.17 - 5389668.17
Annual Loan Payment will drop by = $18924278.00
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