Question $2-$ Time Value of Money

A$.$ Mr$.$ Ronald deposits K$550$ annually in a bank for $5$ years. The deposits earn a

compound interest rate of $10\%.$ What will be value of this series of deposits at the end

of $8$ years? $(2\mathrm{.}5$ Marks$)$

B$.$ XYZ Company expects to receive $K100000$ for a period of $10$ years from a project it

has just undertaken. Assuming $10\%$ rate of interest, how much would be the present

value of this annuity. $(2\mathrm{.}5$ Marks$)$

C$.$ Three banks offering three different rates:

Bank X $12\%$ per annum $-$ Compounding monthly

Bank Y $12\mathrm{.}5\%$ per annum $-$ Compounding quarterly

Bank Z $11\mathrm{.}6\%$ per annum $-$ Compounding daily.

Client is interested to invest or borrow $K100,000,$ period of investment or borrowing is $5$ years.

Which bank would be better to $($i$)$ investor $($ii$)$ borrower? Advice with justifications. $(10$

Marks$)$