Ahmed wanted to borrow AED 1,100,000 to purchase a house. She has approached two different banks and they have given her the following loan offers.

Bank A: AED 1,100,000 13 years at 9%

Bank B: AED 1,100,000 11 years at 9%

The up-front costs for the two loans are equal. The appropriate opportunity cost or discount rate to value the mortgage choices is 13%.

Required:

a) Calculate the annuities for both home loan options.

b) Calculate the Present Value for both home loan options with a 13% opportunity cost.

c) Based on the PV calculated in part b) above, recommend which of the two loans is the best option for Amira and give one reason for your answer.