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You are an eccentric German chocolatier, and you want a brand new chocolate making machine! You can rent one for 500k pa. You're going to
You are an eccentric German chocolatier, and you want a brand new chocolate making machine! You can rent one for 500k pa. You're going to rent the machine on a contract for 5 years, and so you will need to borrow 500k each year for 5 years at a 14% interest rate.
At the end of year 3, you will come into a lump sum of money, 250,000. If you assume that you can pay down the loan by 250k at the end of the year 3, how much will you owe at the end of year 5?
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