How large would her payments be

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Reference no: EM132824496

Question - An investment has the following expected cash flows:

(Year) (Cash flows)

1 RM80,000

2 200,000

3 240,000

4 320,000

5 400,000

a. The discount rate is 10 percent. What is the investment's future value?

b. Your bank offers to lend you RM100,000 at an 6% annual interest rate to start your new business. The terms require you to amortize the loan with 10 equal end-of-year payments. How much interest would you be paying in Year 2?

c. Suppose Ivan borrowed RM50,000 at a rate of 8% and must repay it in 4 equal installments at the end of each of the next 4 years. How large would her payments be?

d. How should we compare interest rates quoted over different time intervals - for example, monthly versus annual rates?

Reference no: EM132824496

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