A$.$ What will your monthly payment be$?$ Problem: You are in need for a student loan to pay for the Fall semester. Your bank agreed on a $$8000$ for $4$ years at a compound interest rate of $7\%$

per year. The bank is giving you $3$ options to repay your debt:

Option $1$: Pay all the amount at the end of year $4$

Option $2$: Pay Interest annually and principal paid at the end

Option $3$: Pay interest and a portion of the principal annually

Construct the payment schedule for each one of the above options and answer the following:

How much interest will you pay for this loan in each case?

How much is the total amount at the end of $4$ years?

Which one potion will you choose? Why?

Draw Cash Flow Diagram for each one of the options

B$.$ What will be the total cost of financing if you pay off the loan as scheduled?

C$.$ If you make your required payments each month then win the lottery at the end of year $10,$ what would it cost you to pay off the house

immediately at that point?

It is a very good idea to start depositing money into a savings account every month to build a very secure$,$ low risk asset. If you deposit $$250$

every month $($a very manageable amount$)$ into an account that earns an annual rate of $3\%,$

A$.$ How much will you have in your account after $10$ years?

B$.$ How much would you have after $30$ years?

C$.$ How long will it take you to accumulate a balance oProblem: You are in need for a student loan to pay for the Fall semester. Your bank agreed on a $$8000$ for $4$ years at a compound interest rate of

per year. The bank is giving you $3$ options to repay your debt:

Option $1$: Pay all the amount at the end of year $4$

Option $2$: Pay Interest annually and principal paid at the end

Option $3$: Pay interest and a portion of the principal annually

Construct the payment schedule for each one of the above options and answer the following:

How much interest will you pay for this loan in each case?

How much is the total amount at the end of $4$ years?

Which one potion will you choose? Why?

Draw Cash Flow Diagram for each one of the options

Note: This can be worked in Excel or MatLab, or worked by hand and scanned. In any case, neatness and clarity count. Upload your solution to

Canvas by the deadline.