Determine the cash flow to the woman under an interest-only loan, in which Ponzi will pay the annual interest expense each year and pay the principal back at the end of the contract?
Required data:
Chuck Ponzi has talked an elderly woman into loaning him $25,000 for a new business venture. She has, however, successfully passed a finance class and requires Chuck to sign a binding contract on repayment of the $25,000 with an annual interest rate of 10% over the next ten years. She has left the method of repayment up to him.