Question

Answer All Questions 1. A merchant borowed 15MID from a bank whichis to be repaidto bankthrough 10 years by semiannual installment. 1:12%. Required calculate semama installment for these cases 1-interest is annual 2-interest.sompounded semi amually 3-interest.compomded monthly (25Marks) 2. Suppose that certain end of year expenses are expected to be a gradient $1000 and a uniform annual installment $1500 for n= 8 year. If interest is 10% per year, findi Present worth at the beginning of the first year, and Uniform annual xerth (25Marks)

Answer 2 questions please

Answer 1

Question 1. We assume 15 MID to be 15 million dollars meaning 15,000,000

Case (1)

PV =15,000,000

NPER = 10*2 = 20

RATE = (1+0.12)^(1/2) -1 = 0.0583

So, Semi annual installment =PMT(RATE,NPER,PV) =PMT(0.0583,20,15000000) = $1,289,783.70 = 1.29 MID

Case (2)

PV =15,000,000

NPER = 10*2 = 20

RATE = 0/12.2 = 0.06

So, Semi annual installment =PMT(RATE,NPER,PV) =PMT(0.06,20,15000000) = $1,307,768.35 = 1.31MID

Case (3)

PV =15,000,000

NPER = 10*2 = 20

RATE = ((1+0.12/12)^12 -1)/2 = 0.0634

So, Semi annual installment =PMT(RATE,NPER,PV) =PMT(0.0634,20,15000000) = $1,344,228.69 = 1.34MID

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