Calculation Of Loan Repayment At Beginning And End Of Each Year

Question

Suppose you take out a loan of $10,000, repayable by five equal annual installments. The interest rate is 10% per year.

(a) How much do you need to repay per year to the nearest cent if payments are due:

(i) at the beginning of each year (ii) at the end of each year?

(b) Which loan in part (a) is preferable, (i) or (ii)? Explain your answer.

Summary

The question belongs to Finance and it discusses about calculation of repayment of a loan at the beginning and end of each year and whether or not it is preferable.

Total Word Count 95