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Question 1 (a) Your brother has asked you to help him with choosing an investment. He has $6,000 to invest today for a period of
Question 1 (a) Your brother has asked you to help him with choosing an investment. He has $6,000 to invest today for a period of two years. You identify a bank term deposit that pays an interest rate of 5.55% with the interest paid quarterly. Calculate the value of the investment in two years. (5 marks) (b) Mr. Brymo can afford $650 per month of monthly repayment towards a car loan. The current lending rate is at 12% per year and the loan maturity should be for 4 years. Calculate the amount that Mr. Brymo can borrow. (5 marks) (c) Mr. Corona has 30 years more for his retirement. If he is planning to save $10,000 per annum for the said period, starting at the end of the year, calculate the amount that he will have when he retires. Assume that the interest earned is 6%. (5 marks) (d) Holland has taken a loan amounting to $250,000 and expects to repay loan in 30 years. If the interest rate is 6% per annum, calculate his annual repayment. (5 marks) (e) Raj Krishnan bought a Honda Accord for a price of $151,345. He deposited $15,000 and financed the rest through the dealer at an APR of 3.9% for 4 years. Calculate the effective annual rate (EAR) if payments made monthly. (5 marks) (Total: 25 marks)
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