help in homework

New User?

Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / Company A have borrowed RM 1 million from Public Bank

Company A have borrowed RM 1 million from Public Bank

Economics

Company A have borrowed RM 1 million from Public Bank. They have to pay back this amount with interest at rate of 5% in next 5 years. Suggest the best method of repayment of the loan for the following 4 equivalences:

Method 1: At end of each year pay RM 200,000 principal + interest due.  

Method 2: Pay interest due at end of each year + principal at end of five years.

Method 3: Pay in five end-of-year payments (RM 234,000 end of each year).

Method 4: Pay principal + interest in one payment at end of five years.

  1. What the common property do all four method have?
  2. Draw the cash flow diagram,
  3. calculate how much extra on principal the company has to pay as interest for each method of repayment, and
  4. Suggest the best repayment method for the company based on your equivalence analysis.

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

There is one common property in all four methods, that all four methods have simple annual interest payment system.

Ans. 2.

Following formula is used to calculate the interest payment annually.

A = P (1+r)

Fir example, the interest for 1st year will be,

A = 100000(1+5%)

A = 100000(1 + 5÷100)

A = 100000(1+ 0.05)

A = 100000*1.05

A= 1050000

And so on.

Kindly go through the diagram attached to see the cash flow in each method.

Ans. 3

Method 1. Principle + RM 150,000 EXTRA

Method 2. Principle + RM 250,000 EXTRA

Method 3. Principle + RM 170,000 EXTRA

Method 4. Principle + RM 250, 000 EXTRA

ANS. 4.

The best Repayment method for the company is Method 1, as this method decreases the repayment burden overtime.

Also because using this method company saves at least RM 20,000 compared to other feasible methods.

This method also gives maximum possible saving of total interest RM100,000.

Please use this google drive link to download the answer file.       

https://drive.google.com/file/d/1tI6WfWV2fAPg3MUqtt8TBYwwaWB1xhu8/view?usp=sharing

Note: If you have any trouble in viewing/downloading the answer from the given link, please use this below guide to understand the whole process. 

https://helpinhomework.org/blog/how-to-obtain-answer-through-google-drive-link 

Sitejabber (5.0)

BBC (5.0)

Trustpilot (4.9)

Google (5.0)

Related Questions