posted by MBA FINANCE .
1. The Hypothetical Finance Ltd has structured a hire-purchase deal. The required to make a down
Payment of 20 per cent of the investment cost. The hire-term is four years with quarterly payment
in advance. The flat rate of interest is 13 per cent. The finance company would charge a front ended
documentation and service fee and allow rebate for prompt payment @ 0.5 per cent and 1
per cent of investment outlay respectively.
Assuming after paying 24th installment, a hirer wishes the purchase option, what is the interest
rebate according to (i) actuarial method, (ii) rule of 78 method and, (iii) SLM?