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Question 4 (5 marks) Suppose that a borrower takes out a 50-year loan, to be repaid with payments at the end of each year. The
Question 4 (5 marks) Suppose that a borrower takes out a 50-year loan, to be repaid with payments at the end of each year. The annual loan repayment is equal to $2,500 for each of the first 26 years. After that, the repayments decrease by $100 per year. Interest on the loan is charged at an annual effective rate of i%. The principal repaid in year 26 is equal to X. The amount of interest paid in the first year is equal to one of the following 5 expressions. State which of the following expressions is correct, and provide full workings/justification of your choice. X125, 2500125 Xv25, 2500 X, 2500 Xv25, 25Xi. Question 4 (5 marks) Suppose that a borrower takes out a 50-year loan, to be repaid with payments at the end of each year. The annual loan repayment is equal to $2,500 for each of the first 26 years. After that, the repayments decrease by $100 per year. Interest on the loan is charged at an annual effective rate of i%. The principal repaid in year 26 is equal to X. The amount of interest paid in the first year is equal to one of the following 5 expressions. State which of the following expressions is correct, and provide full workings/justification of your choice. X125, 2500125 Xv25, 2500 X, 2500 Xv25, 25Xi
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