Your Neighbour Makes You the Following Offer

question 387

Multiple Choice

Your neighbour makes you the following offer. He would like to borrow $10,000 today. He will repay the $10,000 by making yearly payments with the first payment being for $1,000 at the end of this year. The payments will grow by 10% every year thereafter. If the appropriate discount rate is 12%, how long will it take for your neighbour to repay the loan?

• A) 12.38 years
• B) 10 years
• C) 13.28 years
• D) 18.32 years
• E) 21.38 years

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