Which of these two loans would be preferred

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Reference no: EM131176500

Consider the following two $10,000 loans: 6% per year with 20 annual payments. 5% per year with 10 annual payments. If you face a MARR of 20% which of these two loans would be preferred?

The correct answer is:

The present value of the EMIs in the first loan is 15486. when the annual payments are 10, the present value is 9005.43. Thus, I'd prefer the second loan.

BUT I DO NOT KNOW HOW TO APPROACH THAT ANSWER. Please, provide step by step solution.

Reference no: EM131176500

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