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Time Value of Money You have the chance to buy the neighbors farm for $500,000. You...

Time Value of Money
You have the chance to buy the neighbors farm for $500,000. You have a $100,000 down payment with the rest ($400,000) financed in one of the following ways.
Equal annual payments with an interest rate of 7% for 20 years.
Equal annual payments with an interest rate of 10% for 15 years.
Equal quarterly payments with an interest rate of 8% for 15 years.
Your neighbor will carry the contract.
1) Calculate each of the loans payment and the total payment amounts
7% for 20 years
10% for 15 years
8% for 15 years
2) Which is the best for you? (cheapest total payments for you)
3) Best for the neighbor? (gets him the most money)

Solutions

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 year ago
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