Imagine that you have the opportunity to purchase a large piece of land for $100,000, after taking out a loan. You have decided
to take out a loan for $135,000 in order to cover the cost of the land purchase and building your park. You have hired a financial adviser to help you explore different loan options and decide which one is best for you. Below you will see the different loan options. You will need to calculate the total cost of each loan with interest. Once you have do this you and your group members will need to decide which of the loan options is best for you and why. Option #1 – charges 5% simple interest per year; this is a short-term loan for only 5-years.
Option #2 – charges 7% simple interest per year; this is a short-term loan for only 3-years.
Option #3 – charges 3.2% simple interest per year; there is no time limit on this loan (as a group determine how long you think it will take you to make enough money to be able to pay back the loan with interest)
Option #4 - charges 10% simple interest per year; only lasts 10 months
Option #5 - charges 12% simple interest per year; only lasts 6 months
Written Response
You will be meeting with your financial adviser in two days. Write out which loan option your group is choosing to use and why. You really want to impress her with how much thought you have put into this decision so be as detailed as possible.
Option #1 – charges 5% simple interest per year; this is a short-term loan for only 5-years.
Option #2 – charges 7% simple interest per year; this is a short-term loan for only 3-years.
Option #3 – charges 3.2% simple interest per year; there is no time limit on this loan (as a group determine how long you think it will take you to make enough money to be able to pay back the loan with interest)
Option #4 - charges 10% simple interest per year; only lasts 10 months
