Mill Stone Bakery needs $210,000 today to fund a new project. The project will not produce any cash flows for 2 years and thus the firm agreed to a 2-year, pure discount loan at 8.6 percent interest. How much will the firm owe on this loan at the time it must be repaid?

Question

Quizplus · Accepted Answer

A pure discount loan means the firm will repay the principal plus interest at the end of the term. The future value is calculated as $210,000 * (1 + 0.086)^2 = $247,673.16.

Mill Stone Bakery Needs $210,000 Today to Fund a New