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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
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. (1) What rate of interest is the bank offering you? [3 marks] (ii) Construct an amortization schedule for the repayment of this loan for the first two years. [6 marks] 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? [8 marks] 2
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