QUESTION 3

PART A:

For Istaq's 250,000 dirham bank loan for the car, when using the financial calculator and taking the bank's perspective,

a.

payments are a negative number and the present value is a negative number

b.

payments are a negative number and the present value is a positive number

c.

payments are a positive number and the present value is a negative number

d.

payments are a positive number and the present value is a positive number

PART B:

Ishtaq has applied for a loan for 250,000 dirhams to buy a 350,000 dirham car, so he made a down payment of 100,000 dirhams. The interest rate for a conventional fixed-rate, fixed-term, amortizing loan is 3% per year. He takes the loan for 5 years (60 months) and will make equal monthly payments for 60 months. He now wishes to pay off the loan after 3 years (36 months), but now he finds out there is a 4% prepayment penalty on the outstanding loan balance. Nevertheless, he decides to pay off the loan. How much does he have to pay(to the nearest fil) to the bank to close out the loan including payment of loan balance and prepayment penalty?

a.

104,000

b.

104,524.80

c.

108,695.39

d.

146,320.72

e.

152,173.55

f.

none of the above