You are given the opportunity to borrow $10,000 for 36 months at 12% ANNUAL interest with two repayment options:
Pay interest only (no principal) at the end of each month with full repayment of principal (the amount borrowed) at the end of the 36 months, or Make 36 monthly installment payments of interest and principal at the end of each month (you may use Appendix E to calculate this figure. Please note that Appendix E computes the payments assuming only a $1,000 loan so multiply the payment by 10). (personal finance turning money into wealth 6th edition by arthur j. keown)
For each scenario what will be your monthly payment in years 1 & 2?
For each scenario what would be your total payments of principal and interest over the 36 month term?
Which option would you recommend? Why? (please show work)