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02 Jan 2024, 10:58
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Column 1: $131,250
Column 2: $81,250
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
85%
(hard)
Question Stats:
60% (03:30) correct
40%
(03:25)
wrong
based on 600
sessions
History
Date
Time
Result
Not Attempted Yet
Data Insights (DI) Butler 2023-24 [Question #180, Date: Jan-02-2024] [Click here for Details]
A newly launched small and medium enterprise (SME) company is seeking a loan to support its new project. The company has received loan proposals from two different banks. As per the proposal from Bank A, the company will be provided with an amount of $250,000 at a simple interest rate of 5% per year. The repayment will be made in 12 equal monthly installments, which will include both the principal amount and the interest.
On the other hand, Bank B has offered to provide 125% of the amount proposed by Bank A, with a simple interest rate of 4%. The repayment will also be made in 12 equal monthly installments, including both the principal and the interest.
In the table below, select in column 1 the remaining amount to be paid after six payments, as per the proposal of Bank A, and in column 2 the remaining amount to be paid after nine payments, as per the proposal of Bank B:
| Column 1 | Column 2 | Remaining Amount |
| $81,250 | ||
| $130,800 | ||
| $131,250 | ||
| $162,500 | ||
| $196,875 | ||
| $243,750 |
ShowHide Answer
Official Answer
Column 1: $131,250
Column 2: $81,250
12 Jan 2024, 12:52
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Official Explanation
Proposal of Bank A
Principal amount: 250,000
Annual interest rate: 5%
Annual interest amount: (5/100)*250,000=12,500
Total amount to repay: 250,000+12,500 = 262,500
Installment = 262,500/12 = 21,875
Amount to repay after six months = 262,500-131,250= 131,250
Proposal of Bank B
Principal amount: 125% of the amount proposed by the bank A = 250,000*125%= 312,500
Annual interest rate: 4%
Annual interest amount: (4/100)*312,500=12,500
Total amount to repay: 312,500+12,500 = 325,000
Installment = 325,000/12 = 27,083.33
Amount to repay after nine months = 325,000-243,750= 81,250
Proposal of Bank A
Principal amount: 250,000
Annual interest rate: 5%
Annual interest amount: (5/100)*250,000=12,500
Total amount to repay: 250,000+12,500 = 262,500
Installment = 262,500/12 = 21,875
Amount to repay after six months = 262,500-131,250= 131,250
Proposal of Bank B
Principal amount: 125% of the amount proposed by the bank A = 250,000*125%= 312,500
Annual interest rate: 4%
Annual interest amount: (4/100)*312,500=12,500
Total amount to repay: 312,500+12,500 = 325,000
Installment = 325,000/12 = 27,083.33
Amount to repay after nine months = 325,000-243,750= 81,250
General Discussion
11 Apr 2024, 00:07
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A: $250k, simple interest, 5%, 12 equal month instalments, each including principal + interest
B: $250k*1.25, simple interest, 4%, 12 equal month instalments, each including principal + interest
Column 1 the remaining amount to be paid after six payments, as per the proposal of Bank A
=> the amount to be paid in the remaining half: \(\frac{($250K * 1.05)}{2} = $131.25k\)
Column 2 the remaining amount to be paid after nine payments, as per the proposal of Bank B
=> the amount to be paid in the remaining 3 months: \(\frac{($250k * 1.25 * 1.04)}{12} * 3 = $81.25k\)
B: $250k*1.25, simple interest, 4%, 12 equal month instalments, each including principal + interest
Column 1 the remaining amount to be paid after six payments, as per the proposal of Bank A
=> the amount to be paid in the remaining half: \(\frac{($250K * 1.05)}{2} = $131.25k\)
Column 2 the remaining amount to be paid after nine payments, as per the proposal of Bank B
=> the amount to be paid in the remaining 3 months: \(\frac{($250k * 1.25 * 1.04)}{12} * 3 = $81.25k\)
