Question
QUESTION TWO A). A bank offers to lend you K25, 000, 000 to buy equipment for your growing business. You must sign a loan contract
QUESTION TWO
A). A bank offers to lend you K25, 000, 000 to buy equipment for your growing business. You must sign a loan contract calling for payments of K2, 545,160 at the end of each of the next 25 years.
(i) What rate of interest is the bank offering you?
(ii) Construct an amortization schedule for the repayment of this loan for the first two years.
B). The following data pertains to a common stock:
It will pay no dividends for two years.
The dividend three years from now is expected to be $1.
Dividends are expected to grow at a 7% rate from that point onward.
If an investor requires a 17% return on this stock, what will they be willing to pay for this stock now?
C). Zambia is hosting the 2016 Annual General Meeting for the African Development Bank (AfDB). As such, you have been selected to join a team of ushers who will facilitate the stay of all the delegates. Suppose you were approached by a delegate who held various foreign currencies: R 50, 000, $ 3, 000, 1, 400 and 1, 200. This delegate came to Zambia with the expectation of investing, hence the large sums of money. Using the table below, answer the following questions:
CURENCY | BID/BUYING | ASK/SELLING |
US Dollar $ | 10 | 11 |
GB Pound | 14 | 15 |
Euro | 11 | 12 |
Rand R | 0.6 | 0.7 |
Required:
i. How much Kwacha does the delegate own once he has converted all the currencies he has?
ii. Explain to this delegate the pros and cons of investing in the Lusaka Stock Market (LUSE) today.
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