Problem:
A person borrows $200 to be repaid in 8 years with 14% annually compounded interest. The loan may be repaid at the end of any earlier year with no prepayment penalty.
Required:
Question 1: What amount will be due if the loan is repaid at the end of year 1?
Question 2: What is the repayment at the end of year 4?
Question 3: What amount is due at the end of the eighth year?
Note: Provide support for your underlying principle.