1. You want to borrow 10000 . Bank A offers you a loan contract according to...
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1. You want to borrow 10000 €. Bank A offers you a loan contract according to which you have to pay back the loan in 10 annual installments of 1200 € per year (the first installment is due one year after signing the contract). Bank B also offers you a contract with 10 annual installments, but you have to pay 1100 € annually during the first 5 years and 1300 € annually during years 6 - 10. Finally, bank C requires you to pay annually 1300 € during years 1-5 and 1100 € during years 6-10. Which of the three contracts is best for you if you want to miminize the present value of the installments based on a constant annual interest rate of 5%? 1. You want to borrow 10000 €. Bank A offers you a loan contract according to which you have to pay back the loan in 10 annual installments of 1200 € per year (the first installment is due one year after signing the contract). Bank B also offers you a contract with 10 annual installments, but you have to pay 1100 € annually during the first 5 years and 1300 € annually during years 6 - 10. Finally, bank C requires you to pay annually 1300 € during years 1-5 and 1100 € during years 6-10. Which of the three contracts is best for you if you want to miminize the present value of the installments based on a constant annual interest rate of 5%?
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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