Question
SUBJECT 2 A car buyer is considering taking out a 10,000 euro interest-free loan with annual fixed interest rate of 4% and duration of 7
SUBJECT 2 A car buyer is considering taking out a 10,000 euro interest-free loan with annual fixed interest rate of 4% and duration of 7 years, where for simplicity we consider that the installments will be paid at the end of each year. A. Calculate the annual installment of the loan. Using the amortization table, calculate the interest and the remaining amount of the loan at the end of each year. (Grade: 1.5) B. Suppose that a two-year grace period is proposed to the borrower so that during the first two years of the loan to be paid only interest. To calculate the annual installment of the loan after end of the grace period. Which case from the previous ones, i.e. sub-question A and sub-question B, would you choose to pay off your own loan. Give reasons. (Grade: 3.5)
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