I want help understanding the concepts 3) You can pay off a 20 year, $20,000 loan at an effective annual interest rate of i = 8% in one oftwo ways: using the amortization method with payments P at the end of each year, or using a sinkingfund that earns an effective annual interest rate of i = 7.5%. For the second option, you make interestpayments at the end of each year and pay off the principle in one lump sum at the end of 20 years.Payments into the sinking fund are P minus the interest on the loan. How much extra do you need atthe end of the 20 years to pay off the loan using the second option?

Amortization Method: Using the amortization method, you pay off the loan in equal installments at…

Answered: 3) You can pay off a 20 year, $20,000…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A person has made an arrangement to borrow $1,000 now and another $1,000 two years hence. The entire obligation is to be repaid at the end of four years. If the projected interest rates in years one, two, three, and four are 10%, 12%, 12%, and 14%, respectively, how much will be repaid as a lump-sum amount at the end of four years? $2,797 $1,573 $2,850 $2,178
Assume that your father is now 50 years old and plans to retire after 10 years from now. He is expected to live for another 25 years after retirement. He wants a fixed retirement income of Rs. 5,00,000 per annum. His retirement income will begin the day he retires, 10 years from today, and then he will get 24 additional payments annually. Your father has current savings of Rs. 10,00,000 and he expects to earn a return on his savings @ 10% p.a., annually compounding. How much (to the nearest of rupee) must your father save during each of next 10 years to meet his retirement goal?
Answer true or false for the following questions: a) If you multiply the A/F, F/P, and P/G factors together, you will obtain thevalue for the G/A factor. b) For an arithmetic gradient series of monthly cash flows that begins at the endof 25th month, the A/G factor will yield an “A” value beginning at the end oftwo years. c) Consider arithmetic gradient series, G = 100, starting at time period 7 withfive cash flows. An equivalent uniform series A, starting at time period 2 forfour time periods is obtained by 100(P/G, i%, 6)(P/F, i%, 4)(A/P, i%, 4). d) The difference between consecutive cash flow balances corresponding toconsecutive time periods in discounted payback period calculation is equaland the cash flow balance is zero at payback period. e) If the B/C ratio for three alternatives A, B, and C are 2.8, 3.3 and 1.95respectively, the best alternative is always “B” as it has the largest B/C ratio.
A person buys a piece of lot for Php 104239 down payment and 10 deferred semi-annual payments of P 5,000 each, starting 6 years from now. What is the present value of the investment if the rate of interest is 13% per year compounded quarterly? Round off the interest rate to five decimal places. Round your answer to 2 decimal places.
A person needs $17122 immediately as a down payment on a new home. Suppose that she can borrow this money from her company credit union. She will be required to repay the loan in equal payments made every six months over the next 20 years starting on the second year. The annual interest rate being charged is 10% compounded continuously. What is the amount of each payment? INCLUDE THE CASH FLOW DIAGRAM OF THIS PROBLEM AND ROUND OFF INTEREST RATE TO 5 DECIMAL PLACES AND YOUR FINAL ANSWER TO 2 DECIMAL PLACES.
A loan of $18,000 is to be financed over a period of 24 months. The agencyquotes a nominal interest rate of 8% for the first 12 months and a nominal interest rate of 9% for any remaining unpaid balance after 12 months with both rates compounded monthly. At these rates, what equal end-of-the-month payment for 24 months would be required in order to repay the loan?
TRUE OR FALSE Perpetuity is derived from the fact that the number of compounding periods approaches to infinity while the nominal interest rate approaches to 0. This then lumps the expression into ?. Selecting the best alternative always depends on the economy under study, rather than the total costs.
Funds are deposited in a savings account at an interest rate of 8% per annum. What is the initial amount that must be deposited to yield a total of P10, 000.00 in 10 years? a.P5, 631.93 b.P4, 631.93 c.P4, 691.93 d.P4, 231.93
A certain manufacturer deposits P100,000 at the end of every month to save up P5,500,000 for a capital project in four years. To achieve its goal, what nominal interest rate compounded monthly does the manufacturer require on its investment? What is the effective rate?
What lump-sum amount of interest will be paid on a $20,000 loan that was made on May 1, 2020, and repaid on August 1, 2020, with ordinary simple interest at 10% per year?
You are saving up for a down payment on a house. You will deposit $600 a month for the next 24 months in a money market fund. How much will you have for your down payment in 24 months if the fund earns 12% APR compounded monthly?
Suppose that the parents of a young child decide to make annual deposits into a savings account, with the first deposit being made on the child's fifth birthday and the last deposit being made on the 15th birthday. Then, starting on the child's 18th birthday, the withdrawals as shown will be made. If the effective annual interest rate is 8% during this period of time, what are the annual deposits in years 5 through 15? Use a uniform gradient amount (G) in your solution.

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