You do not have enough money to start your business so you approach a bank. The bank offers to lend you Rs 100,000 and you sign a security paper. The bank asks you to issue a security paper in their favor on the following terms required by the bank. Par Value = Rs 100,000 (ie. Loan Principal Amount) Maturity = 2 years Coupon Rate = 15% mark-up paid at end of each year Require rate of return = 10% pa Note: This is a simplified case where we are creating a short-term bank loan like a Bond. For the Bank, what is the Value of Investing in security with you?

You do not have enough money to start your business so you approach a bank. The bank offers to lend you Rs 100,000 and you sign a security paper. The bank asks you to issue a security paper in their favor on the following terms required by the bank. Par Value = Rs 100,000 (ie. Loan Principal Amount) Maturity = 2 years Coupon Rate = 15% mark-up paid at end of each year Require rate of return = 10% pa Note: This is a simplified case where we are creating a short-term bank loan like a Bond. For the Bank, what is the Value of Investing in security with you?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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