Suppose a firm is considering taking out a loan for $10,000. The length of the loan is 5 years and the loan interest rate is 15% annual compound interest. The firm's real MARR is 8% and the inflation rate is 4%. The firm is considering two options:
1) pay the accumulated interest at the end of each year and repay all of the principal at the end of the fifth year and
2) make a single lump-sum payment of principal and interest at the end of 5 years. Recommend the best of these two options based on a then-current present worth analysis.