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A 20 year loan of 100,000 is to be repaid with payments at the end of each year. It can be repaid under the following
A 20 year loan of 100,000 is to be repaid with payments at the end of each year. It can be repaid under the following two options.
i.Equal annual payments at an annual effective interest rate of 7.00.
ii. Installments of 5,000 the first year and increase by k each year thereafter with a final payment of 5000+19k. Interest is at an annual effective rate of 6.00% for the second option.
How much more interest is option ii paying relative to option i
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