Question
Harry wants to open a new business and calculated that he would need R300,000 at start-up. He visited several banks and financing institutions and received
Harry wants to open a new business and calculated that he would need R300,000 at start-up. He visited several banks and financing institutions and received a number of offers with a wide range of repayment options. In an effort to understand the options better, Harry decided to evaluate all options at the same interest rate of 12% (nominal) per year, compounded monthly. As some of the options are rather complex, he asked you to help. From the alternatives below, select the five options that are economically equivalent to the amount Harry would need at start-up.
A. | Monthly payments starting on approximately R12,630 at the end of the first month and thereafter increasing monthly by 5% until month 24, when the loan will be repaid | |
B. | Monthly payments starting on approximately R7,790 at the end of the first month and thereafter increasing monthly by 5% until month 24, when the loan will be repaid | |
C. | Monthly payments starting on approximately R11,920 at the end of the first month and thereafter increasing monthly by R200 until month 24, when the loan will be repaid | |
D. | A repayment amount of approximately R14,120 paid monthly for 24 months, starting 1 month from now | |
E. | A repayment amount of approximately R15,870 paid monthly for 24 months, starting 1 month from now | |
F. | Two equal payments of approximately R188,160 paid at the end of year 1 and at the end of year 2 | |
G. | A single repayment amount of approximately R266,240 paid 1 year from now | |
H. | A single repayment amount of approximately R338,040 paid 1 year from now | |
I. | Monthly payments starting on approximately R10,550 at the end of the first month and thereafter increasing monthly by R200 until month 24, when the loan will be repaid | |
J. | Two equal payments of approximately R190,460 paid at the end of year 1 and at the end of year 2 | |
K. | A single repayment amount of approximately R380,910 paid 2 years from now | |
L. | A single repayment amount of approximately R336,000 paid 1 year from now | |
M. | A single repayment amount of approximately R376,320 paid 2 years from now | |
N. | A repayment amount of approximately R14,790 paid monthly for 24 months, starting 1 month from now | |
O. | Monthly payments starting on approximately R1,280 at the end of the first month and thereafter increasing monthly by R200 until month 24, when the loan will be repaid |
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