The board of directors of Bax Co is considering to obtain $285,000 of new financing for its expansion plans. As the Finance Manager, you are required to explain to the Board of Directors the following: (a) Explain the main difference between money market and capital market. Provide an example for each. (6 marks) (b) Suppose Bax Co decides to obtain a five-year bank loan and is agreeable to pay five annual equal annual installment payments. HBS Bank has agreed to charge an annual interest of 10 percent for the five-year loan. (1) Compute the annual installment payment that Bax Co has to pay. (4 marks) (ii) Prepare the Loan Amortisation schedule for the five years to indicate the amount charged as interest and the amount which will contribute to the loan principal reduction.
