A commercial real estate developer plans to borrow money to finance an upscale mall in an exclusive area of the city. The developer plans to get a loan that will be repaid with uniform payments of $400,000 over a 15-year period beginning in year 2 and ending in year 15. How much will a bank be willing to loan at an interest rate of 10% per year?
What will be an ideal response?
P = 400,000(P/A,10%,15)(P/F,10%,1)
= 400,000(7.6061)(0.9091)
= $2,765,882
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