Question (7 marks)

Assume that you have $10,000 to invest in a term deposit. In this situation, explain which of the

three (3) deposits listed below (a. c.) you would select if the selection strategy is totally

depend on the higher percentage per annum (per year).

a) a 90-day deposit that has a maturity value of $10,250.

b) a 130-day deposit that has a maturity value of $10,390.

c) a 145-day deposit that has a maturity value of $10,420.

Question (7 marks)

Explain the trade credit facility provided by some companies to their customers that allow them

to manage their day-to-day liquidity situation and calculate the opportunity cost of an invoice

that specifies the following conditions, as shown below (a. c.):

a) conditions: 1.25/10, n/30.

b) conditions: 1.25/10, n/60.

c) conditions: 1.5/10, n/60.

Question (11 marks)

As a small software developer firm, you have approached the AXZ Bank to obtain a term loan so

that the firm can purchase a new server. The AXZ bank provides two (2) offers to your

company, as listed below:

a) a loan of $100,000 over a five (5) year period at an interest rate of 7.65% per annum

(per year) payable at the end of each month.

b) a loan of $100, 000 over a three (3) year period at an interest rate of 5.5% per annum

(per year) payable at the end of each month.

Requirements

1. Calculate the monthly loan instalments for each offer listed above a) and b).

2. Calculate the total interest payments for each offer listed above a) and b).

(Note Students must clearly provide all workings and calculations in their response)