4.) An important rule is that you should never show a simple rate on a time line or use it in calculations unless what condition holds? (Hint: Think of annual compounding, when r_SIMPLE = r_EAR = r_PER.) What would be wrong with your answer to parts(1) and (2) if you used the simple rate 10%rather than the periodic rate r_SIMPLE/2 = 10%/2 = 5%?

k. (1)Construct an amortization schedule for a $1,000 loan that has a 10% annual interest rate that is repaid in three equal installments.

(2)What is the annual interest expense for the borrower, and the annual interest income for the lender, during Year 2?