Assume that you will have a 10-year, $10,000 loan to repay to your parents when you graduate from college next month. The loan, plus 8 percent annual interest on the unpaid balance, is to be repaid in 10 annual installments of $1,490 each, beginning one year after you graduate. You have accepted a well-paying job and are considering an early settlement of the entire unpaid balance in just three years (immediately after making the third annual payment of $1,490). Annual Interest Reduction in unpaid bal Unpaid balance Year 1 Year 2 Year 3