BTL Ltd. intends to raise $300,000 to upgrade its existing database system. The supplier of the system has agreed to finance the purchase of the system with a down payment of $100,000, followed by five annual instalments of $50,000 to be made at the end of each year. Alternatively, AEL Bank has also offered to lend BTL the needed sum of $300,000. The bank requires a lump- sum payment of $435,000 in five years.

a. What is the annual interest rate on the loan from the database supplier? (4 marks)