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Consider a loan of $75000.00 repayable by equal quarterly instalments over 15 years calculated at an interest rate of 08.80% per annum convertible quarterly. From the lender's perspective, set a cash flow model in tabular form which covers all the scheduled repayments in the 15 years, allowing for tax at 30% on the interest component of the loan. (a) Calculate the amount of each quarterly payment. (b) calculate the after tax internal rate of return achieved by the lender on its investment over this loan to an accuracy of 0.01%, assuming that the borrower follows the loan schedule and there is no default.

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Financial Management, Finance

Category:- Financial Management
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