Reference no: EM132547870

Question I. Ali borrowed Rs.550,000 from a bank on terms of 12 year, 10% nominal interest rate. The loan calls for quarterly payments.

a) Calculate the amount of quarterly payment you would be paying every period?

b) How much is the total amount of interest that Ahmed has paid in two years? What is the ending balance of principal after two years?

Question II. Allied Bank offers to lend you at a nominal rate of 5.0%, simple interest, with interest paid quarterly. Standard Bank offers to lend you the same amount, but it will charge 6.0%, simple interest, with interest paid at the end of the year. Which bank will you select to borrow money?

Question III. Your grandmother left you $100,000 in a trust fund that pays 8.5% interest. You must spend the money on your college education, and you must withdraw the money in 3 equal installments, beginning immediately. How much could you withdraw at the beginning of each year and end up with zero in the account? (First make a time-line indicating inflows and outflows and then calculate for the asked output).