You are offered an add-on loan for $4,500 at 18% for 5 years.

What is the monthly payment?

What is the amount of interest?

What is the true interest rate cost of this loan?

If you could pay the same loan above at a compound rate:

What would the monthly payment be?

What would the amount of interest be?

Suppose that you are only allowed to make a balloon payment to the principal of the compound interest loan. You have $1,000 to put down at the beginning of year three. How many payments will you save?