Calculations for each scenario and label all cash flows

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Reference no: EM131426020

Construct a cash flow diagram illustrating the cash flows involved in the following transaction from the bank’s viewpoint. The amount loaned is $6000 at 4% compound interest for ten years. Be sure to label all amounts including the final repayment. The borrower repays the loan with the following schedule:

(a) Lump sum repayment at the end of the year 10 of the principle plus accrued interest.

(b) Year-end payments of equal installments as in a standard installment loan contract.

Determine the total interest given to the bank under each scenario. Show all cash flow diagrams and calculations for each scenario and label all cash flows.

Reference no: EM131426020

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