a.

A construction loan requires you to repay $1,200,000 over 6 years at an interest rate of 5%. Interest is compounded annually, and you are to make one payment at the end of each year for one sixth of the principle plus any interest owed. Calculate the total payments. How much total interest did you pay?

b.

Using the same information from above, if you assume an inflation rate of 3%, what is the Net Present Value of your principal and interest payments at the end of 6 years?