Each month starting next month (i.e, one month from now) you can save $100 of your income at 3% APR compounded monthly for the next 10 years. You would like to borrow $8,000 right now and you have two choices: The first loan has 6% APR compounded and paid monthly The second loan has 6% APR compounded monthly but paid annually 1. If you take the first loan, you will be able to pay $100 monthly and save nothing until the loan is repaid. If you take the second loan, you will be depositing your saved $100 monthly on your savings account ( 3% APR compounded monthly) over the year and then will be making the payment using money saved over one year. How much will you be able to pay annually on the second loan? 2. How long will it take to repay the first loan? The second? 3. (Bonus Question) How much money will you have on your savings account in 10 years if you take the first loan (after you repay the loan the money will start accumulating on you savings account)? If you take the second loan? 4. (Bonus Question) What loan should you take? 1. If you take the first loan, you will be able to pay $100 monthly. If you take the second loan, you will be depositing your saved $100 monthly on your savings account (3\% APR compounded monthly) over the year then will be making the payment. How much will you be able to pay annually on the second loan? 1. If you take the first loan, you will be able to pay $100 monthly. If you take the second loan, you will be depositing your saved $100 monthly on your savings account ( 3% APR compounded monthly) over the year and then will be making the payment. How much will you be able to pay annually on the second loan? 50 51 3. How much money will you have on your savings account in 10 years if you take the first loan (after you 52 repay the loan the money will start accumulating on you savings account)? If you take the second loan? 53 54 55 Months to save under the first loan 56 Accumulated savings 57 58 Months to save under the second loan 59 Accumulated savings 60 61 4. What loan should you take? 62 63 I should chose the ... loan, because .... \begin{tabular}{|l|} \hline 64 \\ \hline 65 \\ \hline 66 \\ \hline 67 \\ \hline \end{tabular} 64 65 66 67