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Tianyi buys a car that costs $43,200

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Tianyi buys a car that costs $43,200.a) She pays $7,000 down and takes a loan for the rest. She will make bi- weekly payments (assume 26 per year) of $235.02 at the end of each 2 weeks

for the next 7 years. What is the effective annual interest rate on the loan?

She changes her mind, and instead of option a), she pays nothing down, but

increases her bi-weekly payments to $280, except for the last one which will

be exactly enough to pay o the loan. (The term and interest rate on the

loan are the same as in part a).)

b) Is her last payment a drop payment or a balloon payment? How much is

it?