ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
Question
Book Icon
Chapter 4, Problem 106P
To determine

(a)

Graphical representation of monthly payment as a function of interest rate.

Expert Solution
Check Mark

Answer to Problem 106P

Graphical representation of monthly payment as a function of interest rate.

Explanation of Solution

Given information:

  • Loan Amount - $900
  • Time period − 1 years
  • Rate of Interest − 4-14% per annum
  • Capital Recovery Factor:

The capital recovery factor is used to find the uniform annual amount A of a uniform series from a known present worth at the given interest rate i. It is calculated as:

A=Pi(1+i)n(1+i)n1=P(A/P,i,n).

Calculation:

The loan amount is $900. The monthly payments are to be made, therefore, the rate of interest will be divided by 12, while the time period will be multiplied by 12.

Based on the above information, the following table can be created:

Time Period (in years) Time Period (in months) Rate of Interest (compounded annually) Rate of Interest (compounded monthly) Loan Amount to be paid Per month repayment
1 12 4% 0.003 900 76.63
1 12 5% 0.004 900 77.05
1 12 6% 0.005 900 77.46
1 12 7% 0.006 900 77.87
1 12 8% 0.007 900 78.29
1 12 9% 0.008 900 78.71
1 12 10% 0.008 900 79.12
1 12 11% 0.009 900 79.54
1 12 12% 0.010 900 79.96
1 12 13% 0.011 900 80.39
1 12 14% 0.012 900 80.81

Now, the graph will be plotted between the rate of interest compounded annually and per month repayment. The graph will look as:

ENGR.ECONOMIC ANALYSIS, Chapter 4, Problem 106P , additional homework tip  1

To determine

(b)

Graphical representation of monthly payment as a function of time period.

Expert Solution
Check Mark

Answer to Problem 106P

Graphical representation of monthly payment as a function of interest rate.

Explanation of Solution

Given information:

  • Loan Amount - $900
  • Rate of Interest − 6% per annum.
  • Time period − 36-84 months
  • Capital Recovery Factor:

The capital recovery factor is used to find the uniform annual amount A of a uniform series from a known present worth at the given interest rate i. It is calculated as:

A=Pi(1+i)n(1+i)n1=P(A/P,i,n).

Calculation:

The loan amount is $900. The monthly payments are to be made, therefore, the rate of interest will be divided by 12, while the time period will be multiplied by 12.

Based on this information, following table can be created:

Time Period (in months) Rate of Interest (compounded annually) Rate of Interest (compounded monthly) Loan Amount to be paid Per month repayment
36 6% 0.005 900 27.38
37 6% 0.005 900 26.70
38 6% 0.005 900 26.06
39 6% 0.005 900 25.46
40 6% 0.005 900 24.88
41 6% 0.005 900 24.33
42 6% 0.005 900 23.81
43 6% 0.005 900 23.31
44 6% 0.005 900 22.84
45 6% 0.005 900 22.38
46 6% 0.005 900 21.95
47 6% 0.005 900 21.53
48 6% 0.005 900 21.14
49 6% 0.005 900 20.75
50 6% 0.005 900 20.39
51 6% 0.005 900 20.04
52 6% 0.005 900 19.70
53 6% 0.005 900 19.37
54 6% 0.005 900 19.06
55 6% 0.005 900 18.76
56 6% 0.005 900 18.47
57 6% 0.005 900 18.19
58 6% 0.005 900 17.91
59 6% 0.005 900 17.65
60 6% 0.005 900 17.40
61 6% 0.005 900 17.15
62 6% 0.005 900 16.92
63 6% 0.005 900 16.69
64 6% 0.005 900 16.47
65 6% 0.005 900 16.25
66 6% 0.005 900 16.04
67 6% 0.005 900 15.84
68 6% 0.005 900 15.65
69 6% 0.005 900 15.45
70 6% 0.005 900 15.27
71 6% 0.005 900 15.09
72 6% 0.005 900 14.92
73 6% 0.005 900 14.75
74 6% 0.005 900 14.58
75 6% 0.005 900 14.42
76 6% 0.005 900 14.26
77 6% 0.005 900 14.11
78 6% 0.005 900 13.96
79 6% 0.005 900 13.82
80 6% 0.005 900 13.68
81 6% 0.005 900 13.54
82 6% 0.005 900 13.41
83 6% 0.005 900 13.28
84 6% 0.005 900 13.15

Now, the graph will be plotted between the time period and per month repayment. The graph will look as:

ENGR.ECONOMIC ANALYSIS, Chapter 4, Problem 106P , additional homework tip  2

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 4 Solutions

ENGR.ECONOMIC ANALYSIS

Ch. 4 - Prob. 6PCh. 4 - Prob. 7PCh. 4 - Prob. 8PCh. 4 - Prob. 9PCh. 4 - Prob. 10PCh. 4 - Prob. 11PCh. 4 - Prob. 12PCh. 4 - Prob. 13PCh. 4 - Prob. 14PCh. 4 - Prob. 15PCh. 4 - Prob. 16PCh. 4 - Prob. 17PCh. 4 - Prob. 18PCh. 4 - Prob. 19PCh. 4 - Prob. 20PCh. 4 - Prob. 21PCh. 4 - Prob. 22PCh. 4 - Prob. 23PCh. 4 - Prob. 24PCh. 4 - Prob. 25PCh. 4 - Prob. 26PCh. 4 - Prob. 27PCh. 4 - Prob. 28PCh. 4 - Prob. 29PCh. 4 - Prob. 30PCh. 4 - Prob. 31PCh. 4 - Prob. 32PCh. 4 - Prob. 33PCh. 4 - Prob. 34PCh. 4 - Prob. 35PCh. 4 - Prob. 36PCh. 4 - Prob. 37PCh. 4 - Prob. 38PCh. 4 - Prob. 39PCh. 4 - Prob. 40PCh. 4 - Prob. 41PCh. 4 - Prob. 42PCh. 4 - Prob. 43PCh. 4 - Prob. 44PCh. 4 - Prob. 45PCh. 4 - Prob. 46PCh. 4 - Prob. 47PCh. 4 - Prob. 48PCh. 4 - Prob. 49PCh. 4 - Prob. 50PCh. 4 - Prob. 51PCh. 4 - Prob. 52PCh. 4 - Prob. 53PCh. 4 - Prob. 54PCh. 4 - Prob. 55PCh. 4 - Prob. 56PCh. 4 - Prob. 57PCh. 4 - Prob. 58PCh. 4 - Prob. 59PCh. 4 - Prob. 60PCh. 4 - Prob. 61PCh. 4 - Prob. 62PCh. 4 - Prob. 63PCh. 4 - Prob. 64PCh. 4 - Prob. 65PCh. 4 - Prob. 66PCh. 4 - Prob. 67PCh. 4 - Prob. 68PCh. 4 - Prob. 69PCh. 4 - Prob. 70PCh. 4 - Prob. 71PCh. 4 - Prob. 72PCh. 4 - Prob. 73PCh. 4 - Prob. 74PCh. 4 - Prob. 75PCh. 4 - Prob. 76PCh. 4 - Prob. 77PCh. 4 - Prob. 78PCh. 4 - Prob. 79PCh. 4 - Prob. 80PCh. 4 - Prob. 81PCh. 4 - Prob. 82PCh. 4 - Prob. 83PCh. 4 - Prob. 84PCh. 4 - Prob. 85PCh. 4 - Prob. 86PCh. 4 - Prob. 87PCh. 4 - Prob. 88PCh. 4 - Prob. 89PCh. 4 - Prob. 90PCh. 4 - Prob. 91PCh. 4 - Prob. 92PCh. 4 - Prob. 93PCh. 4 - Prob. 94PCh. 4 - Prob. 95PCh. 4 - Prob. 96PCh. 4 - Prob. 97PCh. 4 - Prob. 98PCh. 4 - Prob. 99PCh. 4 - Prob. 100PCh. 4 - Prob. 102PCh. 4 - Prob. 103PCh. 4 - Prob. 104PCh. 4 - Prob. 105PCh. 4 - Prob. 106PCh. 4 - Prob. 107PCh. 4 - Prob. 108PCh. 4 - Prob. 109PCh. 4 - Prob. 110PCh. 4 - Prob. 111PCh. 4 - Prob. 112PCh. 4 - Prob. 113PCh. 4 - Prob. 114PCh. 4 - Prob. 115PCh. 4 - Prob. 116PCh. 4 - Prob. 117PCh. 4 - Prob. 118PCh. 4 - Prob. 119PCh. 4 - Prob. 120PCh. 4 - Prob. 121PCh. 4 - Prob. 122PCh. 4 - Prob. 123PCh. 4 - Prob. 124PCh. 4 - Prob. 125PCh. 4 - Prob. 126P
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:9780190931919
Author:NEWNAN
Publisher:Oxford University Press
Text book image
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Text book image
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Text book image
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Text book image
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education