4- 24 Three Loan Payment Methods (cont.) Example: Discount versus Interest-only versus Amortized loans Abdullah wants to borrow $40,000 for a period of 5 years. The lenders offers him a choice of three payment structures: 1) Pay all of the interest (10% per year) and principal in one lump sum at 2) Pay interest at the rate of 10% per year for 4 years and then a final 3) Pay 5 equal payments at the end of each year inclusive of interest and Under which of the three options will Abdullah pay the least interest and the end of 5 years; payment of interest and principal at the end of the 5th year; part of the principal. why? Calculate the total amount of the payments and the amount of interest paid under each alternative