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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 mortgages 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 = Principal x Rate x Time

Interest expense = 230,000 x 0.15 x 1 (1 year)

Interest expense = 34,500

For the second option:

Interest expense = 450,000 x 0.13 x 1 (1 year)

Interest expense = 58,500

For the third option:

Interest expense = 300,000 x 0.125 x 1 (1 year)

Interest expense = 37,500

Total interest expense at the end of the first year = 34,500 + 58,500 + 37,500 = 130,500

Service charges = 27,500

Total charges at the end of the first year = 130,500 + 27,500 = 158,000

Task 2:

Total loan repaid at the end of the second year for the first option:

Total installment = (230,000 + 34,500)/8 = 33,062.50

Total loan repaid = 33,062.50 x 2 = 66,125

Total loan repaid at the end of the second year for the second option:

Total installment = (450,000 + 58,500)/30 = 16,183.33

Total loan repaid = 16,183.33 x 2 = 32,366.66

Total loan repaid at the end of the second year for the third option:

Total installment = (300,000 + 37,500)/2 = 168,750

Total loan repaid = 168,750

Task 3:

The type of loan given by the Bank is a mortgage loan for the first option and personal loans for the second and third options.