Mosupi is interested in starting a new business and is investigating options for the loan that he would like to secure toget his business off the ground. He consulted his Bank, Madi Bank Limited. Mosupi is interested in obtaining a loan of P1 500 000.00. Mosupi is investigating two options based on the offer from his bank, obtaining the loan of P1 500 000 at a simpleinterest rate of 11% to be repaid over 5 years or securing a loan at an interest of 11% compounded annually over five years.Answer the following questions based on the scenario above, (a) How much interest would Mosupi have paid at the endof five years if he opted for simple interest rate? [4 marks] (b) How much interest would Mosupi have paid if interest iscompounded annually over five years? [3 marks] (c) Based on your answers to (a) and (b) what would be your advice toMosupi in terms of the best option to choose? Support your answer using data. [4 marks] (d) Explain any two factors thatdetermine the amount of interest received by lenders. [4 marks]

1: Kim, J. (2020). 6 Korean. Mermaid Construction: A Compound-Predicate Construction with Biclausal…

Answered: Mosupi is interested in starting a new…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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As an investment advisor, you have been approached by a client called Ramesh, who wants some help in investment related matters. Ramesh is currently 45 years old and has Rs 600,000 in the bank. He plans to work for 15 more years and retire at the age of 60. Ramesh's present salary is Rs 400,000 per year. He expects his salary to increase at the rate of 12 percent per year until his retirement. Ramesh has decided to invest his bank balance and future savings in a portfolio in which stocks and bonds would be equally weighted. For the sake of simplicity, assume that these proportions will be maintained by him throughout. He also believes that bonds would provide a return of 7 percent and stocks a return of 13 percent. You concur with his assessment. Once Ramesh retires at the age of 60 he would like to withdraw Rs 500,000 per year from his investments for the following 15 years as he expects to live upto the age of 75 years. He also wants to bequeath Rs 1,000,000 to his children…
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As an investment advisor you have been approached by a client called Ramesh, who wants some help in investment related matters. Ramesh is currently 45 years old and has Rs 6, 00,000 in the bank. He plans to work for 15 more years and retire at the age of 60. Ramesh’s present salary is Rs 4, 00,000 per year. He expects his salary to increase at the rate of 12% per year until his retirement. Ramesh has decided to invest his bank balance and future savings in a portfolio in which stocks and bonds will be equally weighted. Assume that these proportions will be maintained by him throughout. He also believes that bonds will provide a return of 7% and stocks a return of 13%. Once Ramesh retires at the age of 60 he would like to withdraw Rs 5,00,000 per year from his investments for the following 15 years as he expects to live up to the age of 75 years. He also wants to give Rs 10, 00,000 to his children at the end of his life. How much money would he need 15 years from now? How much should…
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Josh is taking out a mortgage for $161,000 to buy a new house and is deciding between the offers from two lenders. He wants to know which one would be the better deal over the life of the mortgage loan, and by how much. (a) His credit union has offered him a 40-year mortgage loan at an annual interest rate of 4.1%. Find the monthly payment. (b) A bank has offered him a 15-year mortgage loan at an annual interest rate of 3.8%. Find the monthly payment. (c) Suppose Josh pays the monthly payment each month for the full term. Which lender's mortgage loan would have the lowest total amount to pay off, and by how much? • Credit union The total amount paid would be $____ less than to the bank. • Bank The total amount paid would be $____ less than to the credit union.

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