You have a 10 year loan for $20,000 and you make annual payments. The interest rate is 5% annual compounded quarterly.
a) What are your annual payments?
b) If the inflation rate is 3% annual compounded monthly, what is the purchasing power of your final payment in year 0 dollars?
c) What are the equal annual payments in year 0 constant dollars with the above inflation rate?
d) What is the total interest paid in year 0 constant dollars with the above inflation rate?