An investor can purchase one of the loans Loan A: purchase price 10,000 in return for payments of 4,000 at times I, 12, 13. 14. 15. Loan B: purchase price 10,000 in return for payments of L.000 annually for 15 years in arrear. What are the yjelds and which loan should be purchased? The investor may lend or borrow at 4% p.a.

25 Example: An investor can purchase one of the loans Loan A: purchase price 10,000 in return for payments of 4,000 at times 11, 12, 13, 14, 15. Loan B: purchase price 10,000 in return for payments of 1,000 annually for 15 years in arrear. What are the yields and which loan should be purchased? The investor may lend or borrow at 4% p.a.. 4000 (it in ) - 10000