How much should pay today for a promise to receive

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Question a) You borrow N900,000 from your bank for 1 year at 20% annual interest. The bank requires that you maintain a minimum balance of N15,000 in the account at all times. The bank also imposes a Handling Charge of N5,000 for processing the loan. Compute the effective interest rate on the loan.

Question b) How much should you pay today for a promise to receive N1 million in 10 years if the prevailing rate of interest is 15% today and is expected to prevail during the 10 years?

Question c) You deposited N500,000 in your bank account and after 5 years the deposit had grown to N805,500. At what rate of interest had the bank been compounding the interest yearly on the deposit?

Reference no: EM132608888

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