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You borrow $500 from the bank at 5% annual interest rate (compound) for three years. You have two payback options .
Option 1: Receive $25 year 1 Receive $50 year 2, Pay $658 in year 3
Option 2: Receive $500 today and payback $578.81 in year 3.
Please answer the following
| a) What are the receipts and deposits of each option1 and option 2? |
| b) What is the interest paid on each option1 and option 2? |
| c) What is the present worth of option 1? |
| d) What is the present worth of option 2? |
| e) What is the future worth of option 1? |
| f) What is the future worth of option 2? |
| g) What is the best option? |
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