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You are selling used machinery for $10,000. The buyer can pay $3,000 now, $2,500 next year, $2,500 in two years, and $3,000 in three years.

You are selling used machinery for $10,000. The buyer can pay $3,000 now, $2,500 next year, $2,500 in two years, and $3,000 in three years. You require an 8% interest rate.

a. Would you accept the offer?

b. If the borrower wanted to instead make $1,000 payments now, next year, and in two years, how large would their balloon payment in year three need to be for you to accept the offer?

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