Yourquestion:

Subject:FinanceCourse:FINANCE101

How do i make a loan schedule with multiple rates each payment,

for example, I borrow from a bank for $1000, for 4 years; There are 2 banks that offers me the loan.

bank A implies several rates for each year from year 1-4, and The yearly payment of a variable rate loan is calculated as if it is a fixed rate loan on the outstanding loan balance and time remaining on the loan, whenever the variable rate is changed. The variable rate is reset at the beginning of each year.

Year 1 = 0,5%

Year 2 = 1%

year 3 = 1,5%

Year 4 = 2%

To sweeten the deal, Bank A is offering me a special deal, where the first payment of the loan will happen at the end of the second year (but interest on the loan is still accruing).

While Bank B they are offering a fixed rate of 1,75% for a four-years loan

Assume that all loan repayments are made at the end of each year for both Banks A and B.

evaluate :

1. c)Briefly discuss the relative merits of both financing plans. From a financial perspective, which bank is offering a better deal for me?

If the prevailing interest rate is 0.2% (for all maturities), please evaluate the maximum fixed rate that can be charged by Bank B before both loans become comparable.

How do i calculate this in an excel spreadsheet