ECONOMIC

ECONOMIC EQUIVALENCE
EQUIVALENCE FORFOR FOUR
FOUR
REPAYMENT
REPAYMENT PLANS
PLANS OFOF $8,000
$8,000 LOAN
LOAN
BORROWED
BORROWED AT
AT AN
AN INTEREST
INTEREST RATE
RATE OF
OF 10%
10%
PER
PER YEAR
YEAR FOR
FOR A
A PERIOD
PERIOD OF
OF 44
YEARS.
YEARS.
Plan
Plan #1:
#1: $2,000
$2,000 of
of loan
loan principal
principal plus
plus 10%
10% ofof
beginning
beginning of
of year
year (BOY)
(BOY) principal
principal paid
paid at
at the
the
end
end of
of year
year
Plan
Plan #1:
#1: $2,000
$2,000 of
of loan
loan principal
principal plus
plus 10%
10% ofof
beginning
beginning of
of year
year (BOY)
(BOY) principal
principal paid
paid at
at the
the
end
end of
of year
year
Year Amount Interest Total Payment Total end
owed at for the Money from of year
beginning year($) owed at principal payment
of year($) end of amount($) ($)
year($)

1 8000 800 8800 2000 2800

Plan
Plan #1:
#1: $2,000
$2,000 of
of loan
loan principal
principal plus
plus 10%
10% ofof
beginning
beginning of
of year
year (BOY)
(BOY) principal
principal paid
paid at
at the
the
end
end of
of year
year
Year Amount Interest Total Payment Total end
owed at for the Money from of year
beginning year($) owed at principal payment
of year($) end of amount($) ($)
year($)

1 8000 800 8800 2000 2800

2 6000 600 6600 2000 2600
Plan
Plan #1:
#1: $2,000
$2,000 of
of loan
loan principal
principal plus
plus 10%
10% ofof
beginning
beginning of
of year
year (BOY)
(BOY) principal
principal paid
paid at
at the
the
end
end of
of year
year
Year Amount Interest Total Payment Total end
owed at for the Money from of year
beginning year($) owed at principal payment
of year($) end of amount($) ($)
year($)

1 8000 800 8800 2000 2800

2 6000 600 6600 2000 2600
3 4000 400 4400 2000 2400
 Plan
Plan #1:
#1: $2,000
$2,000 of
of loan
loan principal
principal plus
plus 10%
10% ofof
beginning
beginning of
of year
year (BOY)
(BOY) principal
principal paid
paid at
at the
the
end
end of
of year
year
Year Amount Interest Total Payment Total end
owed at for the Money from of year
beginning year($) owed at principal payment
of year($) end of amount($) ($)
year($)

1 8000 800 8800 2000 2800

2 6000 600 6600 2000 2600
3 4000 400 4400 2000 2400
4 2000 200 2200 2000 2200

Total
Total interest
interest paid($2000)
paid($2000) is
is 10%
10% of
of total
total dollar-years($20000)
dollar-years($20000)
Plan
Plan #2:
#2: $0
$0 of
of loan
loan principal
principal paid
paid until
until end
end of
of
fourth
fourth year;
year; $800
$800 interest
interest paid
paid at
at the
the end
end of
of
each
each year
year
Plan
Plan #2:
#2: $0
$0 of
of loan
loan principal
principal paid
paid until
until end
end of
of
fourth
fourth year;
year; $800
$800 interest
interest paid
paid at
at the
the end
end of
of
each
each year
year
Year Amount Interest Total Payment Total end
owed at for the Money from of year
beginning year($) owed at principal payment
of year($) end of amount($) ($)
year($)
1 8000 800 8800 0 800
Plan
Plan #2:
#2: $0
$0 of
of loan
loan principal
principal paid
paid until
until end
end of
of
fourth
fourth year;
year; $800
$800 interest
interest paid
paid at
at the
the end
end of
of
each
each year
year
Year Amount Interest Total Payment Total end
owed at for the Money from of year
beginning year($) owed at principal payment
of year($) end of amount($) ($)
year($)
1 8000 800 8800 0 800
2 8000 800 8800 0 800
Plan
Plan #2:
#2: $0
$0 of
of loan
loan principal
principal paid
paid until
until end
end of
of
fourth
fourth year;
year; $800
$800 interest
interest paid
paid at
at the
the end
end of
of
each
each year
year
Year Amount Interest Total Payment Total end
owed at for the Money from of year
beginning year($) owed at principal payment
of year($) end of amount($) ($)
year($)
1 8000 800 8800 0 800
2 8000 800 8800 0 800
3 8000 800 8800 0 800
 Plan
Plan #2:
#2: $0
$0 of
of loan
loan principal
principal paid
paid until
until end
end of
of
fourth
fourth year;
year; $800
$800 interest
interest paid
paid at
at the
the end
end of
of
each
each year
year
Year Amount Interest Total Payment Total end
owed at for the Money from of year
beginning year($) owed at principal payment
of year($) end of amount($) ($)
year($)
1 8000 800 8800 0 800
2 8000 800 8800 0 800
3 8000 800 8800 0 800
4 8000 800 8800 8000 8800

Total
Total interest
interest paid($3200)
paid($3200) is
is 10%
10% of
of total
total dollar-years($32000)
dollar-years($32000)
Plan
Plan #3:
#3: $2,524
$2,524 paid
paid at
at the
the end
end ofof each
each year
year (interest
(interest
paid
paid at
at the
the end
end of
of each
each year
year is
is 10%
10% of
of amount
amount owedowed at
at
the
the beginning
beginning of
of the
the year,
year, this
this amount
amount ofof interest
interest is
is
included
included in
in $2524).
$2524).
Plan
Plan #3:
#3: $2,524
$2,524 paid
paid at
at the
the end
end ofof each
each year;
year; interest
interest
paid
paid at
at the
the end
end of
of each
each year
year is
is 10%
10% of
of amount
amount owed
owed at
at
the
the beginning
beginning of
of the
the year.
year.

Year Amount Interest Total Payment Total end

owed at for the Money from of year
beginning year($) owed at principal payment
of year($) end of amount ($)
year($)
1 8000 800 8800 1724 2524
Plan
Plan #3:
#3: $2,524
$2,524 paid
paid at
at the
the end
end ofof each
each year;
year; interest
interest
paid
paid at
at the
the end
end of
of each
each year
year is
is 10%
10% of
of amount
amount owed
owed at
at
the
the beginning
beginning of
of the
the year.
year.

Year Amount Interest Total Payment Total end

owed at for the Money from of year
beginning year($) owed at principal payment
of year($) end of amount ($)
year($)
1 8000 800 8800 1724 2524
2 6276 628 6904 1896 2524
Plan
Plan #3:
#3: $2,524
$2,524 paid
paid at
at the
the end
end ofof each
each year;
year; interest
interest
paid
paid at
at the
the end
end of
of each
each year
year is
is 10%
10% of
of amount
amount owed
owed at
at
the
the beginning
beginning of
of the
the year.
year.

Year Amount Interest Total Payment Total end

owed at for the Money from of year
beginning year($) owed at principal payment
of year($) end of amount ($)
year($)
1 8000 800 8800 1724 2524
2 6276 628 6904 1896 2524
3 4380 438 4818 2086 2524
 Plan
Plan #3:
#3: $2,524
$2,524 paid
paid at
at the
the end
end ofof each
each year;
year; interest
interest
paid
paid at
at the
the end
end of
of each
each year
year is
is 10%
10% of
of amount
amount owed
owed at
at
the
the beginning
beginning of
of the
the year.
year.

Year Amount Interest Total Payment Total end

owed at for the Money from of year
beginning year($) owed at principal payment
of year($) end of amount ($)
year($)
1 8000 800 8800 1724 2524
2 6276 628 6904 1896 2524
3 4380 438 4818 2086 2524
4 2294 230 2524 2294 2524

Total
Total interest
interest paid($2096)
paid($2096) is
is 10%
10% of
of total
total dollar-years($20950)
dollar-years($20950)
Plan
Plan #4:
#4: No
No interest
interest and
and no
no principal
principal paid
paid for
for first
first three
three
years.
years. At
At the
the end
end of
of the
the fourth
fourth year,
year, the
the original
original
principal
principal plus
plus (compounded)
(compounded) interest
interest is
is paid.
paid.
Plan
Plan #4:
#4: No
No interest
interest and
and no
no principal
principal paid
paid for
for first
first three
three
years.
years. At
At the
the end
end of
of the
the fourth
fourth year,
year, the
the original
original
principal
principal plus
plus (compounded)
(compounded) interest
interest is
is paid.
paid.

Year Amount Interest Total Payment Total end

owed at for the Money from of year
beginning year($) owed at principal payment
of year ($) end of amount($) ($)
year($)

1 8000 800 8800 0 0

Plan
Plan #4:
#4: No
No interest
interest and
and no
no principal
principal paid
paid for
for first
first three
three
years.
years. At
At the
the end
end of
of the
the fourth
fourth year,
year, the
the original
original
principal
principal plus
plus (compounded)
(compounded) interest
interest is
is paid.
paid.

Year Amount Interest Total Payment Total end

owed at for the Money from of year
beginning year($) owed at principal payment
of year ($) end of amount($) ($)
year($)

1 8000 800 8800 0 0

2 8800 880 9680 0 0
Plan
Plan #4:
#4: No
No interest
interest and
and no
no principal
principal paid
paid for
for first
first three
three
years.
years. At
At the
the end
end of
of the
the fourth
fourth year,
year, the
the original
original
principal
principal plus
plus (compounded)
(compounded) interest
interest is
is paid.
paid.

Year Amount Interest Total Payment Total end

owed at for the Money from of year
beginning year($) owed at principal payment
of year ($) end of amount($) ($)
year($)

1 8000 800 8800 0 0

2 8800 880 9680 0 0
3 9680 968 10648 0 0
 Plan
Plan #4:
#4: No
No interest
interest and
and no
no principal
principal paid
paid for
for first
first three
three
years.
years. At
At the
the end
end of
of the
the fourth
fourth year,
year, the
the original
original
principal
principal plus
plus (compounded)
(compounded) interest
interest is
is paid.
paid.

Year Amount Interest Total Payment Total end

owed at for the Money from of year
beginning year($) owed at principal payment
of year ($) end of amount($) ($)
year($)

1 8000 800 8800 0 0

2 8800 880 9680 0 0
3 9680 968 10648 0 0
4 10648 1065 11713 8000 11713

Total
Total interest
interest paid($3713)
paid($3713) is
is 10%
10% of
of total
total dollar-years($37128)
dollar-years($37128)