Gerald needs to borrow some money to purchase a boat he hopes to use to charter people from Toronto to the islands. He has the following options to choose from for a $25,000 loan on a 5 year term, all rates are quoted as an APR:

i)             5% compounded monthly with annual payments

ii)            3.25% compounded semi-annually with monthly payments

iii)          4.95% compounded annually with annual payments

iv)          2.50% compounded weekly with monthly payments

 

a)   Compute the payment for each option. (12 marks)

b)   Which option should he choose and why? Show all calculations. (12 marks)

c)   What else should Gerald consider when deciding which option to select besides the cost of the boat?

Answer rating: 100% (QA)

a To compute the payment for each option we can use the formula for the present value ... View the full answer