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**10219929** Hi, I would appreciate any help with the following exercise in financial maths. I'm a lawyer and I'm quite lost with the approximation technique to find the interest.

The Problem:

You borrow $ 1000 from a loan shark and are offered a choice of two possible loan repayment schemes:

- 20 monthly repayments of $ 100, with the first repayment being one month after you borrow the $ 1000.

- 10 monthly repayments of $80, with the first repayment being one month after you borrow the $ 1000 followed by a singl repayment of $800, 11 months after you borrow the $ 1000.

The questions:

a) Determine* the effective interest rate J12 that you are being charged in the first option.

b) Determine* the effective interest rate J12 that you are being charged in the second option, and thus __identify__ which of the two options is preferable.

*Within an accuracy of +/- 1.2% which implies that you will need to find i to an accuracy of +/- 0.1%.

Your help is much appreciated.

Mauricio