1. A company takes out a loan of $100,000 at 5 % interest compounded monthly. The term of the loan is eight years, with equal payments of $1,000 per month for 96 months. The balance of the loan is due as a "balloon payment" at the end of the eighth year. a) Draw a cash flow diagram for this problem from the lender's viewpoint, assigning proper symbols to any unknown values. Do not solve for the unknowns. b) Calculate the EFFECTIVE interest rates on this loan for i) one month ii) one year iii) eight years

1. A company takes out a loan of $100,000 at 5% interest compounded monthly. The term of the loan is eight years, with equal payments of $1,000 per month for 96 months. The balance of the loan is due as a "balloon payment" at the end of the eighth year. a) Draw a cash flow diagram for this problem from the lender's viewpoint, assigning proper symbols to any unknown values. Do not solve for the unknowns. b) Calculate the EFFECTIVE interest rates on this loan for i) one month ii) one year iii) eight years