Answered: (a) What is the equivalent cash price…

(a) What is the equivalent cash price of the equipment? (b) How much will be owed at the end of two years? (c) How much of the principal will be repaid within the first two years?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

A company borrowed at 4.38% compounded
semi-annually to purchase equipment,
agreeing to make payments of $2,760 at the
end of every three months for 16 payments.
(a) What is the equivalent cash price of the
equipment?
(b) How much will be owed at the end of two
years?
(c) How much of the principal will be repaid
within the first
two years?
(d) How much interest is paid during the first
two
years?

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