(a) Determine the annual inflation-free interest rate (i) for the bank? (b) What equal monthly payments, in terms of constant dollars over the next 2 years, are equivalent to the series of actual payments to be made over the life of the loan?

(a) Determine the annual inflation-free interest rate (i) for the bank? (b) What equal monthly payments, in terms of constant dollars over the next 2 years, are equivalent to the series of actual payments to be made over the life of the loan?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Please solve this in a copy with all process. Not in excel. The ans is also given. If not done as instructed, I will down vote it.

monthly over 2 years. The bank calculated your
monthly payment at $228. Assuming that the average
general inflation will run at 0.5% per month over the
next 2 years,
(a) Determine the annual inflation-free interest rate (i')
for the bank?
(b) What equal monthly payments, in terms of constant
dollars over the next 2 years, are equivalent to the
series of actual payments to be made over the life of the
loan?
(0.2488%,$214.87)

420)
Suppose that you just purchased a used car worth
$6000 in today's dollars. Assume also that you
borrowed $5000 from a local bank at 9%, compounded

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Step 3: (b) Determine equal monthly payment (in constant $'s):

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