Reference no: EM133034978

Question - There are 2 financial options for Tiffany. A) Tiffany is considering taking a loan for $10000. Her local bank charges 7.8% per year compounded quarterly and requires quarterly repayments. The bank offered Tiffany a one-year interest-only option with her three-year loan. This means that for the first year, every quarter Tiffany would pay only interest on the amount borrowed. Loan repayments consisting of both interest and principal would then commence in the second year continues for the third year.

B) A wealthy family friend nicknamed Lecce had offered to help Tiffany and has made an alternative offer for her to obtain the $10,000 loan. Lecce has proposed the following loan terms over a 12-month period. He claims this is a 'cheaper and simple' with everything paid off at the end of the renovation. Lecce will give her the $10,000 at the start of the month and Tiffany will start paying $900 each month until the end of the loan period. He claims he is entitled to $800 in interest, which will be paid to him under his proposed conditions.