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Question - I borrow $2,000 at an interest rate of 6% per month to be repaid to my dad in 12 months ($100 at month 0 will result in $106 at month 1 because of the 6% interest per month!). I tell my dad I will pay him back at the end of each month according to the following schedule: $200 the second month, $500 the third month, $1000 the third month.
A. What will be the size of the payment at month 12 that will pay off the money I borrowed from my dad? Draw the cash flow diagram.
B. If the loan was repaid in equal end-of-the-month payments over 12 months, how much would each payment be? Draw the cash flow diagram.
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