Screenshot 2019-01-19 at 9.49.29 PM.png - c To determine the amount that the investor paid for the BAB the same calculation process is used but the

# Screenshot 2019-01-19 at 9.49.29 PM.png - c To determine...

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Unformatted text preview: c) To determine the amount that the investor paid for the BAB, the same calculation process is used but the correct interest rate for the investor's equation is the investor's yield (13.27% pa) as follows: S = P(1 + rt) Re-arrange the equation to make P the subject P = S (1 + rt) = 260,000 (1 + 0.1327 x 0.19178082...) = 260,000 (1 + 0.02544932...) = 260,000 (1.02544932...) = 253,547.39252289... = \$253,547.39 Rounded as last step Therefore, the investor paid \$253,547.39. Note that the investor paid more for the BAB than the borrower received. The difference is the acceptance fee taken by the bank....
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