Your company borrows $25,000 from the bank at 12 percent compounded annually to purchase some new machinery. This loan is to be repaid in equal installments at the end of each year over the next 5 years. How much will each annual payment be? What ratios would be impacted by the additional debt? How would you justify this purchase to management?

Your company is considering depositing money in one of three banks, all of which pay 5% interest; bank A compounds annually, bank B compounds semi-annually, and bank C compounds daily. Which bank would you choose? Why?

The process of discounting and compounding are related. Explain the relationship and the significance of understanding this to management or stockholders.