a. Mr. Kiwat borrowed GH¢200,000 from his bankers to buy his dream house. Repayment is over...

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a. Mr. Kiwat borrowed GH¢200,000 from his bankers to buy hisdream house. Repayment is over 4 years and first payment is due oneyear from hence. He will make equal payments to amortize both theprincipal and interest, which is calculated on a reducing balancebasis. The bank will charge 5% above its current base rate of 20%per annum.
Required:
i. Calculate Mr Bruce’s annual payments
ii. Show a table on how the annual payment will liquidate theloan and interest.
b. Cross Ltd has bought an asset with a life span of 4 years. Atthe end of the 4 years, replacement of the asset will costGH¢12,000. In this direction, the company has decided to providefor the future commitment by setting up a sinking fund account intowhich equal annual investment will be made at the end of each year.Interest rate on the investment will be 12% per annum.
Required:
i. Calculate the annual installments
ii. Draw up the sinking fund schedule to show the growth fundiii. Assuming the first payments will be made now and 12 monthsthereafter, what are the annual payments? iv. Draw up the sinkingfund schedule under(c)

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i Mr Bruces effective interest rate would be 205 or25So his effective See Answer

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a. Mr. Kiwat borrowed GH¢200,000 from his bankers to buy hisdream house. Repayment is over 4 years and first payment is due oneyear from hence. He will make equal payments to amortize both theprincipal and interest, which is calculated on a reducing balancebasis. The bank will charge 5% above its current base rate of 20%per annum.Required:i. Calculate Mr Bruce’s annual paymentsii. Show a table on how the annual payment will liquidate theloan and interest.b. Cross Ltd has bought an asset with a life span of 4 years. Atthe end of the 4 years, replacement of the asset will costGH¢12,000. In this direction, the company has decided to providefor the future commitment by setting up a sinking fund account intowhich equal annual investment will be made at the end of each year.Interest rate on the investment will be 12% per annum.Required:i. Calculate the annual installmentsii. Draw up the sinking fund schedule to show the growth fundiii. Assuming the first payments will be made now and 12 monthsthereafter, what are the annual payments? iv. Draw up the sinkingfund schedule under(c)