A bank offers you a choice between a 1-year cash loan at 11% pa, or a 1-year
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Question:
A bank offers you a choice between a 1-year cash loan at 11% pa, or a 1-year gold loan at 2% pa. For the gold loan, interest and principal repayment have to be made in gold. The risk-free interest rate is 9.25% pa and the storage cost for gold is 0.5% pa. Compare the risk and borrowing costs associated with the cash and gold loan. Which loan do you prefer?
Related Book For
Government and Not for Profit Accounting Concepts and Practices
ISBN: 978-1118155974
6th edition
Authors: Michael H. Granof, Saleha B. Khumawala
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