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Question 4Suppose you work at the help desk of Daffodil Bank. Your job is to help customers choosing the rightfinancial product. Currently you are dealing with a customer who is seeking a loan to buy a carcosting $45,000 inclusive of GST. The customer owns a small business and she wants to buy thevehicle for business use only. Daffodil currently offers the following two financing arrangements forthis type of customers:i.ii.She can borrow the money as a consumer loan. All Daffodil consumer loans are fullyamortizing loans. Interest rate is 10.25% per annum fixed for the term of the loan.Orii. She can buy the car under a hire-purchase agreement since she is currently running abusiness. Under a hire-purchase agreement, interests are pre-computed at 10.25% perannum. Hire purchase loans are available for business purchases only. If the customer isbuying the vehicle for her business, she is eligible to apply for this finance arrangement.Following terms and conditions apply to both loan arrangements: balloon payment is available up to20% of the value of the vehicle; a once of application fee of $125 apply; term of the loan is up to 5years.The customer wants to pay a down payment of 10% of the car value and balloon 10% of the loansize. She wants to pay off the loan in equal monthly payments over 5 years starting one month afterthe loan issue. She does not want to add up the application fee to the loan amount.The customer requires you to answer the following questions.A. How much she has to pay at the end of each month over the term of the loan under both loanarrangements (amortizing and pre-computed)?B. What is the total amount outstanding (total amount the customer owes to the bank) at thebeginning of 30th period under both loan arrangements?C. What is the amount of interest payable with the 40th payment under both loan arrangements?D. The customer wants to accumulate the balloon amount by making an equal payment to a savingsaccount at the end of each month over the term of the finance (5 years). If the savings account paysa fixed interest of 4.5% per annum over 5 years, how much she has to deposit to the savings accounteach month? Taking this deposit into account, what will be her total cash outflow (financialobligation) per month under both loan arrangements?E. According to the current taxation law, interests on hire-purchase loans are tax deductible. So if thecustomer buys the car for her business, she is eligible to claim tax refund for the interest paid on thehire purchase. Furthermore, if the vehicle is for business use, the customer is also eligible to claimback the GST (10%) paid on the purchase1 . Taking these two incentives into account, calculate thenet financial cost (interests and fees net of tax deductions and GST claim) for the purchase of thevehicle under pre-computed finance arrangements at the time of borrowing. Assume that thecustomer purchases the vehicle at the beginning of a financial year while all tax deductions and GSTare claimable at the end of the financial year; the customerâs tax rate is 30% and it will remain thesame for the next 5 years and that the appropriate rate for the customer to discount future cashflows is 4.5% p.a. fixed for five years.F. Also calculate the financial cost under the consumer loan (amortizing) arrangements.Summarize your answer to questions A through F in a table. Show workings beneath the table. Allsupporting documents for example the Excel document must also be submitted if you solve theproblem on Excel.