Equivalence | Example 3 – Due is Friday, Sep.

11, at 11:59 pm
(a) (b) (c) (d) (e) (f)

Interest Owed for Total Owed at End

Amount Owed at Total End-of-Year
Year that Year of Year Principal Payment
Beginning of Year Payment
8% × (𝑏) (𝑏) + (𝑐)
Plan 1: Constant principal payment plus interest due.
1 5000 400 5400 1000 1400
2 4000 320 4320 1000 1320
3 3000 240 3240 1000 1240
4 2000 160 2160 1000 1160
5 1000 80 1080 1000 1080
Sum 15000 1200 17200 5000 6200

(a) (b) (c) (d) (e) (f)

Interest Owed for Total Owed at End

Amount Owed at Total End-of-Year
Year that Year of Year Principal Payment
Beginning of Year Payment
8% × (𝑏) (𝑏) + (𝑐)
Plan 2: Principal payment at end of 5 years.
1 5000 400 5400 0 400
2 5000 400 5400 0 400
3 5000 400 5400 0 400
4 5000 400 5400 0 400
5 5000 400 5400 5000 5400
Sum 25000 2000 27000 5000 7000
5000 400 5400 852
4148 331 4479 920
3228 258 3486 994
2234 178 2412 1074
1161 92 1253 1160
15771 1260 17031 5000

5000 400 5400

5400 432 5832
5832 467 6299
6299 503 6802
6802 545 7347
2347