Assuming 50,000 loan repaid at payment of 8,800 annually, 11% rate:
owing end of year#9: 3,258.89 ;
year#10 payment results in investment of 5,182.63 (overpayment) ;
at 4% cpd monthly and annual deposits of 8,800 for 2 years: 23,572.05 .
An investor wishes to borrow £50,000 from a bank at an effective rate of interest of 11% per annum
to finance an expansion of his business. The project is expected to generate net revenues of £8,800
per annum payable in arrears for the next 12 years.
(a) Find the discounted payback period for this project.
(b) Once the loan has been repaid, the investor can earn 4% per annum convertible monthly on
investing the revenues received. Find the total profit that the investor will make at the end
of the 12-year investment project.