Reference no: EM132544060

1. Gomez Electronics needs to arrange financing for its expansion program. Bank A offers to lend Gomez the required funds on a loan in which interest must be paid semi-annually, and the quoted rate is 10.50 percent. Bank B will charge 11.25 percent, with interest due at the end of the year. What is the difference in the effective annual rates charged by the two banks? Also which bank should be preferred by the company to arrange financing?

2. A bank recently loaned you Rs.25,000 to buy a car. The loan is for Eight years (32 quarters) and is fully amortized. The nominal rate on the loan is 9.50 percent, and payments are made at the end of each quarter. What will be the remaining balance on the loan after you make the 15th payment and how much amount of interest you have paid so far?

3. You are willing to pay Rs.17,325 to purchase a perpetuity that will pay you and your heirs Rs.1,350 each year, forever. If your required rate of return does not change, how much would you be willing to pay if this were a 15-year annual payment, ordinary annuity instead of perpetuity?