You have two investment options. Option 1) a $50,000 annual perpetuity Option 2) a $70,000 annual annuity Both plans require first payment one year from today. At what discount rate will you be indifferent between these two options?

Prepare an amortization schedule for a five-year loan of $84,000. The interest rate is 8% per year and the loan calls for equal annual payments. How much interest is paid in the third year? How much total interest is paid over the life of the loan? Provide another amortization schedule if you must pay $8,400 toward the principle each year instead of equal annual payments. How much interest is paid in the third year? Explain why the third year interest paid in the case of equal payment is different from when you must to pay $8,400 toward the principle every year.