If you borrow $5,000 at an annual interest rate of 9.0% for six years, what will your repayment(s) be if this is an interest-only loan?
What will be an ideal response?
Answer: Annual payments for the first five years of interest only = (r) × (PV) = .09 × $5,000 = $450.00. The final payment in year 6 will be the last interest payment plus the principal amount = $450 + $5,000 = $5,450.
Business
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