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5. Tatiana plans to borrow $50,000 over a 10 year period at an annual effective rate of interest of 8% and is considering three possible
5. Tatiana plans to borrow $50,000 over a 10 year period at an annual effective rate of interest of 8% and is considering three possible methods of repayment: (1) The entire loan plus accumulated interest will be paid back in one lump sum at the end of 10 years. (2) Interest will be paid each year as accrued and the principal will be repaid at the end of 10 years (3) She will repay the loan by level payments over the 10-year period. If repayments to the lender can only reinvested at 6% annually, find the yield rates on the three possible repayment schedules given above. (9 points) 5. Tatiana plans to borrow $50,000 over a 10 year period at an annual effective rate of interest of 8% and is considering three possible methods of repayment: (1) The entire loan plus accumulated interest will be paid back in one lump sum at the end of 10 years. (2) Interest will be paid each year as accrued and the principal will be repaid at the end of 10 years (3) She will repay the loan by level payments over the 10-year period. If repayments to the lender can only reinvested at 6% annually, find the yield rates on the three possible repayment schedules given above. (9 points)
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