Suppose you are considering taking consumer loan from bank for one year. Usually, for short-term loans, the bank offers 8 percent interest that compounds annually. Your credit application has been viewed by a few banks and two of them replied; Bank ALFA offers you a loan at 8 percent annual rate-interest payment by the end of year, and Bank BETA offers a loan with the same annual interest rate, but interest payment is 2 percent by the end of each quarter. Which loan do you prefer? Why? Sadia Corporation, based in UAE, produces meat and milk products. The company sold old machinery for 50,000 UAE dirham and decided to put this amount in a term deposit, which usually pays 5 percent annually.A) Calculate the amount of money that Sadia Corporation will receive after 2, 4, and 7 years of deposit.B) Re-calculate results from part (a) if bank offers 5 percent annual compound interest on semi-annual basis.C) Re-calculate results from part (a) if bank offers 5 percent annual simple interest rate basis.

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Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 3P: Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of...

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Suppose you are considering taking consumer loan from bank for one year. Usually, for short-term loans, the bank offers 8 percent interest that compounds annually. Your credit application has been viewed by a few banks and two of them replied; Bank ALFA offers you a loan at 8 percent annual rate-interest payment by the end of year, and Bank BETA offers a loan with the same annual interest rate, but interest payment is 2 percent by the end of each quarter. Which loan do you prefer? Why?

Sadia Corporation, based in UAE, produces meat and milk products. The company sold old machinery for 50,000 UAE dirham and decided to put this amount in a term deposit, which usually pays 5 percent annually.

A) Calculate the amount of money that Sadia Corporation will receive after 2, 4, and 7 years of deposit.

B) Re-calculate results from part (a) if bank offers 5 percent annual compound interest on semi-annual basis.

C) Re-calculate results from part (a) if bank offers 5 percent annual simple interest rate basis.

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