mortgage is an example of installment loan. Installment loans are usually given to those with bad credit and sometimes no credit. This type of loan has a higher interest rate. Short term loan or a small bank loan is a loan that is set to be paid by no more than a year. The bank loans are set for a small amount to be borrowed and a higher interest rate is imposed on the borrowed amount. “Bankers use either the prime rate or LIBOR as their base rate and add to that depending on the creditworthiness of
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indicate the marks for respective question. Attempt all the questions Section A Attempt all questions Each question carries 6 marks [5 x 6 =30] 1. You have to pay $12‚000 a year in school fees at the end of each of the next six years. If the interest rate is 8%‚ how much do you need to set aside today to cover these bills? [3] Answer: Find out the PV of $ 12‚000 as 6 years annuity. Answer – $ Rs 55476 You have invested $60‚476 at 8%. After paying the above school fees‚ how much would
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will pay interest of 5% per year and the principle and interest payments are guaranteed by the government. Alternatively‚ the second investment opportunity is a bond issued by small company and that bond also pays annual interest of 5%. Virtually all investors would buy the government bond the first is less risky while paying the same interest rate as the riskier second bond. Furthermore‚ in order to attract capital from investors‚ the small firm issuing the second bond must pay an interest rate higher
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peers. Some of their weaknesses are a result of their high exposure to credit risk‚ interest rate risk and liquidity risk. Credit risk can be defines as the risk of a corporation not being able to pay its debt as they become due. Keystone has a lot of CD’s on its books and need to pay the holders of the CD as they become due. This is going to put a lot of financial stress on the bank considering the fact that interest rates are low and the national economy is slowing down. Liquidity risk can be defined
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CHAPTER 17 LENDING TO BUSINESS FIRMS AND PRICING BUSINESS LOANS Goal of This Chapter: The purpose of this chapter is to explore how bankers can respond to a business customer seeking a loan and to reveal the factors they must consider in evaluating a business loan request. In addition‚ we explore the different methods used today to price business loans and to evaluate the strengths and weaknesses of these pricing methods for achieving a financial institution’s goals. Key Topics in This Chapter
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Contents 1. Introduction Mercantile Bank Ltd. is committed to provide high quality services to its constituents through different financial products and profitable utilization of fund and contribute to the growth of GDP of the country by financing trade and commerce‚ helping industrialization‚ boosting export‚ creating employment opportunities for the educated youth and encouraging micro-credit leading to poverty alleviation and improving the quality of life of the people and thereby
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collateral security or may grant such advance on the personal security of the borrower. The customer is permitted to withdraw the amount as and when he needs it and to repay it by means of deposit in his account as and when it is feasible for him. Interest is charged on the exact amount overdrawn by the customer and for the period of its actual utilization. Generally an overdraft facility is given by a bank on the basis of a written application and a promissory note signed by the customer. In such
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1.1 Introduction Social Invest Bank Ltd was established on November 22‚1995 with an authorized capital of taka.1000 million and Paid up Capital of Taka 260 Million by a group of rignly successful entrepreneurs from various field of economic activities. It is a Fully licensed scheduled entrepreneurs from various field of economic activities. It is a fully licensed scheduled commercial Bank set up in the private sector in line With the Government to liberalize Banking& Financial services. The founder
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Question 1 (5 points) $100 today is worth the SAME as $100 tomorrow. True False FALSE Question 2 (5 points) At an interest rate of 10% it is better to have $100 today than $120 in 2 years. True TRUE False Question 3 (5 points) Megan wants to buy a designer handbag and plans to earn the money babysitting. Suppose the interest rate is 6% and she is willing to wait one year to purchase the bag. How much babysitting money (to the nearest whole dollar) will she need to earn today to
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higher economic efficiency. 2- When interest rates rise‚ how might businesses and consumers change their economic behavior? Businesses would cut investment spending because the cost of financing this spending is now higher‚ and consumers would be less likely to purchase a house or a car because the cost of financing their purchase is higher. 3- How can a change in interest rates affect the profitability of financial institutions? A change in interest rates affects the cost of acquiring funds
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