When calculating the cash equivalent value of an assumable loan,you find the present value of the payments using the:
A)Contract interest rate
B)Incremental borrowing cost
C)Market interest rate
D)Discount rate

Question

Quizplus · Accepted Answer

The cash equivalent value of an assumable loan is determined based on the market interest rate, which represents the current rate for loans of similar terms and credit risk. This reflects the opportunity cost of investing funds in the loan compared to other available investments with similar risk profiles. Therefore, using the market interest rate is the best choice for calculating the cash equivalent value of an assumable loan.

When Calculating the Cash Equivalent Value of an Assumable Loan,you