Solve each of the following three problems, all of which involve borrowing money from a...
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Finance
Solve each of the following three problems, all of which involve borrowing money from a bank with an APR of 7.5% compounded annually. Look carefully at how the problems differ from one another, despite appearing similar. In your solutions, say a few words explaining how you can tell which the appropriate formula is to apply in each case.
a. Suppose that you borrow $1000 once per year, beginning today, and ending 12 years from now (so you borrow your last $1000 on the twelve-year anniversary of todays date). How much will your total debt be at the end of the 12th year?
b. Suppose that you borrow $12,000 today. You repay the loan over the course of twelve years, making a payment every year on the anniversary of todays date. The first payment will be one year from today, and the last payment will be twelve years from today. How much should each payment be?
c. Suppose that you borrow $12,000 today, and repay the loan all at once, on the twelve-year anniversary of todays date. How much will you have to repay on that date?
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