Some possible sources of financing for start-up business

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(a) A loan of shs 2,000,000 disbursed today is repaid in four installments commencing at end of year one .The second repayment is at end of year two and is half as much again as the first installment and is 25% less than the third installment(due at the end of year four). The Final installment is due at the end of year five and is 20% more than the first installment.The rate of interest is 16% per annum in years one and two,18% per annum in years three and four and 14% per annum in years five and six.Compute the amount of each installment.

(b) If there is an increase in interest rates,which would you rather have shorted,long-term bonds or short term bonds? explain.

Reference no: EM131995424

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