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Question 4 [25 marks] Bank ABC charges 15.2% compounded monthly on its business loans. Bank XYZ charges 15.5% compounded semiannually. As a potential borrower, which
Question 4 [25 marks] Bank ABC charges 15.2% compounded monthly on its business loans. Bank XYZ charges 15.5% compounded semiannually. As a potential borrower, which bank would you go to for a new loan? Why? (10 marks) Suppose you borrowed $4,500 at 10% annually compounded interest to be repaid in 3 equal annual installments. Required: Calculate the end-of-year payment necessary to amortize the loan and prepare a loan amortization schedule. (10 marks) A $1,000 par value bond carries a coupon rate of 6.5 percent and has a yield to maturity of 7.29 percent. The inflation rate is 3.13%. What is the bond's real rate of return? (5 marks)
Question 4 [25 marks]
Bank ABC charges 15.2% compounded monthly on its business loans. Bank XYZ charges 15.5% compounded semiannually. As a potential borrower, which bank would you go to for a new loan? Why? (10 marks)
Suppose you borrowed $4,500 at 10% annually compounded interest to be repaid in 3 equal annual installments.
Required:
Calculate the end-of-year payment necessary to amortize the loan and prepare a loan amortization schedule. (10 marks)
A $1,000 par value bond carries a coupon rate of 6.5 percent and has a yield to maturity of 7.29 percent. The inflation rate is 3.13%. What is the bond's real rate of return? (5 marks)
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
