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A company is required by the terms of a contract to signal its ability to pay by depositing a sum of $20500 in a bank

  1. A company is required by the terms of a contract to signal its ability to pay by depositing a sum of $20500 in a bank for the duration of a contract lasting 3 years, which it can reclaim, with interest, at the end of the contract period. What will be the sum available to the company on completion of the contract if the compound interest rate is fixed at 12 per cent per annum?
  2. The interest quoted to a small business for a short-term loan of 1 year is 2.5 per cent per month. What is the annual percentage rate (APR)?
  3. A sole trader wishes to purchase a vehicle for the business and is quoted an annual percentage rate of interest of 22.9 per cent on a loan of $12000 over 3 years. Calculate:
    1. The interest paid on the loan.
    2. The total cost of the loan if repayment is made over 2 years at the monthly equivalent interest rate of 1.73 per cent (=22.9 per cent APR).
    3. The difference in the amount of interest paid between (a) and (b).
  4. A manager of a graphics company has to decide whether to accept an offer of a final cash payment, in respect of copyright, of $96600 in 4 years from Waffle plc or one from Blarney plc offering $105000 after 5 years. Calculate the present value of each option if the interest rate is fixed at 8.5 per cent over the lifetime of the agreement. Which option should be accepted?
  5. Allan wishes to invested RM8000 in a fixed deposit account for one year. He has two options:
    1. Bank A which offers 3.7% interest compounded semi-annually.
    2. Bank B which offers 3.75% interest compounded annually.

Which bank should Allan choose? Give your reason.

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