5. Tom Sewel has gathered data on the costs of a solar water heater system. During cloudy days an electric heating element in the solar heating system will provide the necessary heat. The installed cost of two solar panels, a small back-up electric pump, and a storage tank with auxiliary electric heating element is $1200. Due to local subsidies, the net savings in electricity cost will be $60 a year, decreasing at 2.5% each year as the subsidies drop. The solar water heater will not have any salvage value at the end of its useful life, assumed to be 10 years. Can the initial cost be recovered during the life of the solar heater assuming a 1%/yr rate for discounted payback period analysis?

Secured loans are protected by collateral security. examples: title loans where the borrower uses the car title as collateral security interest rates are lower and repayments are longer therefore risk is low as a collateral security is given as guarantee to the bank in case of failure to pay the loanunsecured loans are not protected by collateral security but it is given on the creditworthiness of the borrower, trusting that she/he will pay on time. examples; payday loans is a short term loan where the borrower lends money from the bank and pays is back when the borrower receives his/her wages.interest rates are high and repayments are shorter. but the risk is high as no collateral security is given as a guarantee to the bank for payment of the loan

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