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(a)Your business requires a loan of $150,000. OCBC bank has offered a loan facility with an interest of 10.8% compounded monthly, whereas UOB bank will

(a)Your business requires a loan of $150,000. OCBC bank has offered a loan facility with an interest of 10.8% compounded monthly, whereas UOB bank will charge 0.2% more, compounded semiannually. DBS bank will not charge you any interest, but a lump-sum payment of $200,000 is required three years later.

Indicate which bank you should borrow from and rank the banks from the bank with the highest to the lowest preference. Show your reasoning. (10 marks)

(b) Round your answers to two (2) decimal points. You are expecting to receive $25,000 in two years time when your endowment policy expires. When you receive it, you intend to invest it in a mutual fund which returns 5% per year.

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