Assume that the equipment from the previous exercise -( An advertisement for specialized equipment states that the list price of the equipment is $ 80,000. It requires a prompt payment of $ 20,000 and to assume a promissory note for five years and an interest rate of 12% per year. The promissory note stipulates an annual payment of $ 14,980. The first payment will be made one year after purchasing the equipment. )- actually has a market value of $ 80,000. A prompt payment of $ 20,000 will be made and $ 14,980 will be paid annually for five years.

1. What is the true interest rate on this note?

2. How much will the debt balance be after making the second annual payment?

3. Suppose no prompt payment is made and $ 15,000 is paid annually for five

years, using the rate calculated in question 1 of this exercise, how much will the buyer owe at the end of the five years?