You are taking a 5 - year business loan for $250,000 that you will amortize yearly with 60 equal monthly payments at an APR of 10%. Your lender wants a fully paid - up life insurance policy to protect his or her interest. You will get a decreasing term policy that pays exactly the balance at the beginning of each year. You are a healthy, 35 - year - old male.

(a) Create an amortization table for the loan and show the balances at the beginning of each year.

(b) Using the balances at the beginning of each year from problem 5a, create the 5 - year decreasing term policy and get the price for this policy as an up - front payment. Use 5% as the APR for calculating present values. Assume that your insurance company prices this policy at 35% above the ideal calculation number.

(c) If you borrow the money for the policy along with your loan, what ’ s your effective APR (effective annual percentage rate [EAPR])?