1 list the five key factors in interest formula equivalence, Ask an Expert

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1. List the five key factors in interest formula (equivalence equations). Explain how the interest rate and analysis period are decided for a given problem. Also, discuss why each of these factors is, in real life, more probabilistic than deterministic.

2. A company borrows $6000 in December 2013. If the interest rate is 5%, what single payment must be made in December 2019 to repay the entire principal? If the company chooses to make uniform annual payments instead (starting December 2014), what would be the value of such annual payments? Illustrate your answer with a cash flow diagram.

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