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Suppose you have planned to start a small business in your area of interest. You...

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Accounting

  1. Suppose you have planned to start a small business in your area of interest. You have borrowed tk100,000 (principal amount) for initial investment from a bank for 10 years at the rate 9% interest. This course has opened your eyes to consider several plans to make the repayment. These are:
  1. No partial payment of principal; only interest is paid each year, and the principal is paid in a lump sum at the end of the period.
  2. It involves systematic reduction of the principal of the loan by uniform repayment of principal with diminishing interest.
  3. This plan involves systematic reduction of the principal of the loan by a scheme that makes the sum of interest payments and the principal payment.
  4. This plan involves no payment of either principal or interest until the single payment of both at the end of the tenth year.

Show the cash-flow diagram for each plan. Complete the following table for each plan.

End of year

Interest due

Total money owned before year-end payment

Year-end payment

Money owned after year-end payment

0

1

2

3

4

5

6

7

8

9

10

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