Project A: The investor buys a block of flats for 900,000 by making a down payment of 150,000 and taking an interest-only loan for two years for the remaining 750,000 (1.e. they pay interest on the loan and will repay the capital at the end). The interest rate on the loan is 10% payable monthly, so the investor has to pay 6,250 at the end of each month. In return, they receive 25,000 at the end of each month in rent. In addition, the investor has to pay 10,000 in taxes at the end of the 6th month, and 215,000 in taxes at the end of the 18th month. Two years after the initial purchase, the investor sells the block of flats for 975,000, out of which she uses 750,000 to repay her loan. Project B: The investor deposits 150,000 for two years in a bank account where the effective interest rate for the first year is 7% and for the second year is 6%. The investor receives interest at the end of each month for two years and then withdraws the initial capital at the end (IT) Compute the net present value for i = 0.01 and i = 0.10 for each project and use linear interpolation to approximate the internal rate of return for the two investments. One round of linear interpolation is sufficient (iv) Compare these two projects - which one would you advise the investor to select? Give a clear argument that supports your choice, using the calculations you have already done. Project A: The investor buys a block of flats for 900,000 by making a down payment of 150,000 and taking an interest-only loan for two years for the remaining 750,000 (1.e. they pay interest on the loan and will repay the capital at the end). The interest rate on the loan is 10% payable monthly, so the investor has to pay 6,250 at the end of each month. In return, they receive 25,000 at the end of each month in rent. In addition, the investor has to pay 10,000 in taxes at the end of the 6th month, and 215,000 in taxes at the end of the 18th month. Two years after the initial purchase, the investor sells the block of flats for 975,000, out of which she uses 750,000 to repay her loan. Project B: The investor deposits 150,000 for two years in a bank account where the effective interest rate for the first year is 7% and for the second year is 6%. The investor receives interest at the end of each month for two years and then withdraws the initial capital at the end (IT) Compute the net present value for i = 0.01 and i = 0.10 for each project and use linear interpolation to approximate the internal rate of return for the two investments. One round of linear interpolation is sufficient (iv) Compare these two projects - which one would you advise the investor to select? Give a clear argument that supports your choice, using the calculations you have already done