Question: 3(3+3+4)

a.The SIBL offers 8.5% interest, compounded quarterly on term borrowing. The DBBL Offers 8.25% interest, compounded monthly.Based on effective interest rate, in which bank would you prefer to borrow fund and justify your findings.

b. Define effective annual rate (EAR) with examples. Differentiate between annuity cash flows and mixed stream with example

c. Ishraf got his driving license one week back, and he wants to buy a new car for 12,50000Tk. He has lump sum amount of 375000Tk. today to invest. Ishraf is a risk averse investor and he has following investment options after approaching different banks.

i.BRAC Bank offers 12.25% term deposit compounded semi-annually.

ii.NRB Bank offer 12% term deposit compounded quarterly.

iii.Padma Bank offers 12.85% term deposit compounded monthly.

Calculate how long will it take for Ishraf to accumulate enough money to buy a car in each of the three cases?