Question

M & M Farm, a leading onion producer want to borrow $150,000 from Standard Bank which will be repaid annually for 5 years at an interest of 23% per year. You have been employed as a Farm Manager and your first task is to advise management on which amortisation schedule to use for the loan repayment. Using the information given

a. State the amortisation schedule you can advise M&M farm management to use and why?

b. Present your loan payment schedule based on your answerin (a) above

Answer 1

Solution :-

(a)

Amount Borrowed = $150,000

Interest per year = 23%

Life = 5 Years

Now Value of Each Installment = $150,000 / PVAF ( 23% , 5 )

= $150,000 / 2.8035

= $53,505.06

(b)

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