Multiple Choice
Suppose the government of Germany offers you a 3-year, non-amortizing €50,000 loan to entice you to undertake a particular project within its borders. In addition, the government offers you an attractive rate of i€ = 10% when loans of similar risk yield a return of i€ = 15%. The German tax rate is 50%. What is the present value of the interest subsidy on this loan?
A) €2854.03
B) €3108.56
C) €3250.66
D) €4895.60
E) €5708.06
Correct Answer:
Verified
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