ABC bank gave out a RM 500,000 loan to DEF company at 12% per annum for 2 years.

a) According to the loan contract, DEF must repay 25% principle plus promised interest payment every 6 months. Estimate the Cash flow (CF) and Present Value (PV) for the next 6 months and 1 year. (4 marks)

b) If the contract said principle will be paid-off only at the end of the contract but BEF company must pay promised interest payment every 6 months, estimate the CF and PV for the next 6 months and 1 year. Interpret these results and your results on question 5a. (3 marks)