5.(a) Mr. Kashif has PKR 10,000 that he can deposit in any of three savings accounts for a 3-year period. Bank A compounds interest on an annual basis, bank B compounds interest twice each year, and bank C compounds interest each quarter. All three banks have a stated annual interest rate of 4%. (Show all calculations)

i. What amount would Mr. Kashif have at the end of the third year, leaving all interest paid on deposit, in each bank?

ii. What effective annual rate (EAR) would he earn in each of the banks?

iii. On the basis of your findings in parts a and b, which bank should Mr. Kashif deal with? Why?

(b) Discuss the different types of yield curves and how these yield curves are related to the cost of borrowing.?