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show in a table (beg. balance, PMT, principle, interest rate, ending balance) for number 4. Use the following information for Problems 1 through 4. Chuck
show in a table (beg. balance, PMT, principle, interest rate, ending balance) for number 4.
Use the following information for Problems 1 through 4.
Chuck Ponzi has talked an elderly woman into loaning him $25,000 for a new business venture. She has, however, successfully passed a finance class and requires Chuck to sign a binding contract on repayment of the $25,000 with an annual interest rate of 10% over the next ten years. She has left the method of repayment up to him.
- Discount loan (interest and principal at maturity). Determine the cash flow to the woman under a discount loan, in which Ponzi will have a lump-sum payment at the end of the contract.
- Interest-only loan (regular interest payments each year and principal at maturity). Determine the cash flow to the woman under an interest-only loan, in which Ponzi will pay the annual interest expense each year and pay the principal back at the end of the contract.
- Fully amortized loan (annual payments for principal and interest with the same amount each year). Determine the cash flow to the woman under a fully amortized loan, in which Ponzi will make equal annual payments at the end of each year so that the final payment will completely retire the original $25,000 loan.
- Amortization schedule. Ponzi may choose to pay off the loan early if interest rates change during the next ten years. Determine the ending balance of the loan each year under the three different payment plans
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