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Business, 03.11.2020 16:20 teresaswinger

You can retire a loan either by paying off the entire amount $8000 now, or by paying $6000 now, $2000 at the end of 5 years, and an additional $2000 at the end of 10 years. Find a cutoff value r0 such that if the nominal rate r is < r0, then you should pay off the entire loan now, but if r > r0, then it is preferable to wait. Assume that interest is compounded continuously.

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You can retire a loan either by paying off the entire amount $8000 now, or by paying $6000 now, $200...

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