The lending institution has two options which is: 1: They will offer an annual simple interest rate of 15% howev the year for 5 years. 2: They will offer an annual compound interest rate of 10% for he term.
The lending institution has two options which is: 1: They will offer an annual simple interest rate of 15% howev the year for 5 years. 2: They will offer an annual compound interest rate of 10% for he term.
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 15P
Related questions
Question
please answer with complete solution
![IV.
Odette and Johnson planned to put up a business which is a gaming hub for online games. They needed PHP
250,000 as the capital to fully operate the business planned by borrowing the capital into a lending company
in their town. The lending institution has two options which is:
Option 1: They will offer an annual simple interest rate of 15% however they will pay interest every
end of the year for 5 years.
Option 2: They will offer an annual compound interest rate of 10% for 5 years and they will pay for it
after the term.
Task:
a. Compute for each offer in option 1 and option 2.
b. Which option will make a disadvantage for Odette and Johnson?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0d3c0c99-4a9c-4b53-8588-b5701238000b%2F4ef9cde6-c423-4a90-aefe-96012e3b86bd%2Fo6pdsfq_processed.png&w=3840&q=75)
Transcribed Image Text:IV.
Odette and Johnson planned to put up a business which is a gaming hub for online games. They needed PHP
250,000 as the capital to fully operate the business planned by borrowing the capital into a lending company
in their town. The lending institution has two options which is:
Option 1: They will offer an annual simple interest rate of 15% however they will pay interest every
end of the year for 5 years.
Option 2: They will offer an annual compound interest rate of 10% for 5 years and they will pay for it
after the term.
Task:
a. Compute for each offer in option 1 and option 2.
b. Which option will make a disadvantage for Odette and Johnson?
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT