Question 1

Assume that you have $10,000 to invest in a term deposit. In this situation, explain which of the three (3) deposits listed below (a. – c.) you would select if the selection strategy is totally depend on the higher percentage per annum (per year).

  1. a 90-day deposit that has a maturity value of $10,250.
  2. a 130-day deposit that has a maturity value of $10,390.
  3. a 145-day deposit that has a maturity value of $10,420.

Question 2 

Calculate the opportunity cost of an invoice that specifies the following conditions, as shown below (a. – c.):

  1. conditions: 1.25/10, n/30.
  2. conditions: 1.25/10, n/60.
  3. conditions: 1.5/10, n/60.

Question 3

As a small software developer firm, you have approached the AXZ Bank to obtain a term loan so that the firm can purchase a new server. The AXZ bank provides two (2) offers to your company, as listed below:

  1. a loan of $100,000 over a five (5) year period at an interest rate of 7.65% per annum (per year) payable at the end of each month.
  2. a loan of $100, 000 over a three (3) year period at an interest rate of 5.5% per annum (per year) payable at the end of each month.

Requirements

  1. Calculate the monthly loan instalments for each offer listed above – a) and b).
  2. Calculate the total interest payments for each offer listed above – a) and b).
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