DL hote present loan proposal to dashen bank and the Bank provides three credit schemes to the loan. The first option is to borrow birr 230000 mortages to be paid with 8 years at equal installment at rate of 15% semi Annually. The second an third option are to borrow birr 450000 for 30 months at equal installment at a rate of 13% and birr 300000 for a year at equal
installment are rate of 12.5% semi annually Respectively.the bank agreed with the hotel and the loan disbursed with additional service charges of Birr 27500(one time is borrowing cost for the three loans) Task1 calculate the interest expense and charges at the end of first year Task 2 calculate total loan repaid at the end of second year
Task3 Demonstrate type of loan given by the Bank
Calculate this question based on Ethiopia credit and debt system
Task 1:
For the first option:
Interest expense for the first year = (230,000 * 0.15/2) = 17,250
Service charge = 27,500
Total charges for the first year = 17,250 + 27,500 = 44,750
For the second option:
Interest expense for the first year = (450,000 * 0.13/2) = 29,250
For the third option:
Interest expense for the first year = (300,000 * 0.125/2) = 18,750
Total interest expense and charges at the end of the first year = 29,250 + 18,750 + 44,750 = 92,750
Task 2:
For the first option:
Total loan repaid at the end of the second year = 230,000 + (230,000 * 0.15/2 * 2) = 276,500
For the second option:
Total loan repaid at the end of the second year = 450,000 + (450,000 * 0.13/2 * 2) = 522,000
For the third option:
Total loan repaid at the end of the second year = 300,000 + (300,000 * 0.125/2 * 2) = 337,500
Task 3:
The type of loan given by the Bank is a fixed-rate loan, as the interest rate remains constant throughout the loan term for each option.