A loan of $50,000 will be repaid in 5 years with interest at 12% payable annually....

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A loan of $50,000 will be repaid in 5 years with interest at 12% payable annually. Three plans will be considered: • Plan 1: involves no partial payment of the principal (loan); only interest is paid each year, and the principal is paid at the end of the period. • Plan 2: involves systematic reduction of the principal of the debt by uniform repayment of principal (20% reduction each year). • Plan 3: involves no payment (either principal or interest) until the single payment of both at the end of the period. Calculate the year-end payments in each of these plans. Also draw the cash flow diagram for each plan to show the receipts and payments in each plan. A loan of $50,000 will be repaid in 5 years with interest at 12% payable annually. Three plans will be considered: • Plan 1: involves no partial payment of the principal (loan); only interest is paid each year, and the principal is paid at the end of the period. • Plan 2: involves systematic reduction of the principal of the debt by uniform repayment of principal (20% reduction each year). • Plan 3: involves no payment (either principal or interest) until the single payment of both at the end of the period. Calculate the year-end payments in each of these plans. Also draw the cash flow diagram for each plan to show the receipts and payments in each plan.

Answer rating: 100% (QA)

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