Question

After shopping for a car Amelia ended up borrowing $10800 from her grandparents at 9% per year compounded annually with repayment at the end of 5 years. Her Grandparents asked her to develop some alternative repayment options. If Amelia's TVOM is 12%, what is the present worth for Amelia of each of the following 3 alternatives?

1) Interest only at the end of each year and principal at the end of the fifth year. $

2) Equal annual payments. $

3) Pay the principal and interest in one lump sum after 5 years? $

If Amelia's TVOM is 5%, what is the present worth for Amelia of each of the following 3 alternatives?

1) Interest only at the end of each year and principal at the end of the fifth year. $

2) Equal annual payments. $

3) Pay the principal and interest in one lump sum after 5 years? $

Answer 1