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Value of Money in a Loan Situation

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Shanghai Winters, one of BC's biggest customers, has requested a loan with favorable terms. Sheila and Ed decide to offer this customers a $70,000 five year note receivable. You recommend that since this is your best customer, they offer a 4% interest rate rather than the 7% going rate.

Using your knowledge of the time value of money, offer them guidance in each situation. Include the following in your answer:
What TVM concept (s) is represented in the situation?
What is the value of the money represented by the situation?
How did you arrive at the value?

I need calculations and a sound explanation.

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Solution Summary

Word document attached applies the concept of time value of money to a situation where you could offer your best customer a lower interest rate on a loan.

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Shanghai Winters, one of BC's biggest customers, has requested a loan with favorable terms. Sheila and Ed decide to offer this customers a $70,000 five year note receivable. You recommend that since this is your best customer, they offer a 4% ...

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Manal Elkhoshkhany, MBA
Education
  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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