5. (20 points) You plan to borrow $35,000 to purchase a new car. The nominal interest rate is fixed at 5.60% p.a., compounded monthly. a) Draw a discrete cash flow diagram of the purchase and payback on a 5-year loan from the banks perspective.

b) What is the monthly payment on a 5-year loan? c) What is the monthly payment on a 3-year loan? d) What is the difference in the amount of interest paid over the lifetime of each loan? (Calculate the interest paid for a 5-year loan and a 3-year loan and subtract one value from the other.) e) If the monthly payment is $750, what is the duration of the loan in months? f) (Extra credit) If the monthly payment is $850 for a 4-year loan, what are the nominal and effective annual interest rates? (Show your work. No partial credit.)