Question 4 [10 marks] Martinco Ltd. intends to raise $300,000 to upgrade its existing database system. The supplier of the system has agreed to finance the purchase of the system with a down payment of $100,000, followed by five annual instalments of $50,000 to be made at the end of each year. Alternatively, Excel Bank has also offered to lend Martinco the needed sum of $300,000. The bank requires a lump- sum payment of $435,000 in five years. please show all working out and formula used.

a. What is the annual interest rate on the loan from the database supplier? (4 marks)

b. What is the annual interest rate on the loan from Excel Bank? (4 marks)

c. Based on your analysis, from whom should the money be borrowed? (2 marks)