You have just received an inheritance from your father's estate. You can invest the money and either receive a $20,000 lump-sum amount at the end of 10 years or receive $1,200 at the beginning of each year for the next 10 years (the first $1,200 to be received immediately). If the appropriate interest rate is 7%, which do you prefer?
You wish to purchase a new Sea Ray bow rider, which costs $28,500. If you put down $500, the bank will finance the difference on a 10-year monthly installment plan bearing an annual percentage rate of 12%.
1. Determine the monthly payment.
2. How much interest is paid over the life of the loan?
3. Prepare an amortization schedule for the entire loan period using Excel.