Question 1 Marwan has approached Barclays Bank for a mortgage to buy a house costing… 1 answer below »

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Question 1

Marwan has approached Barclays Bank for a mortgage to buy a house costing AED10,000,000 in the Al Khabisi neighbourhood of Al Ain. With Marwan’s credit score of AA+, Barclays Bank is prepared to loan Marwan part of the house price if he can raise 20% of his own money as deposit for the house. The loan is repayable in equal instalments over a 25-year period, with an interest rate 5%.

Required

Part (a)

i. As a recent MBA Graduate from the Lincoln University Business & Management’s Geneva Business School, you have been approached by Barclays Bank to prepare a neat and clearly labelled loan amortization schedule for presentation to Marwan when he visits the bank tomorrow to complete the necessary paperwork.

[Expected: Correct, clear, neat and well-labelled loan amortisation schedule]

Answer Tip: You can use Microsoft Excel Spreadsheet To Generate Your Answer

Part (b)

Ganesh, a Graduate from Lincoln University Business & Management’s Geneva Business School, who is now working as an Economist with the UAE Ministry of Finance, advises you that interest rates will rise for the next 25-years.

i. Do you think that it is advisable for Marwan to get a fixed or floating rate loan for the whole period if this is the case?

[Expected: 1-Paragraph of between 7-8 lines of a concise argument with rational evidence backing the answer]

Part (c)

Harish, a Graduate from Lincoln University Business & Management’s Geneva Business School, who is now working as an Economist with the Standard Chartered Bank in Dubai, advises you that interest rates will fall over the next 25-years.

i. Do you think that it is advisable for Marwan to get a fixed or floating rate loan for the whole period if this is the case?

[Expected: 1-Paragraph of between 7-8 lines of a concise argument with rational evidence backing the answer]

Question 2

You are given $10,000 to deposit at ADCB for 3 years. The bank pays 10% interest per annum.

Required

i. Calculate the total future value you will receive if the bank pays you simple interest annually over the 3-year period.

ii. Calculate the total future value you will receive if the bank pays you compound interest compounded annually over the 3-year period.

iii. Calculate the total future value you will receive if the bank pays you compound interest compounded continuously over the 3-year period.

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