Chen hopes to eventually replace his old bicycle with a new one. The type of bicycle he wants has a cash price of $2700. Chen could enter into an agreement to buy one of these bicycles from a supplier where he pays a deposit of $200 and 24 monthly payments of $140. A flat rate of interest applies. What would be the best way to describe Chen's agreement: reducing balance loan, interest-only loan, hire purchase, cash payment? b. What is the total cost of the bicycle under this agreement? How much money would Chen actually borrow under this agreement and how much interest would he pay? C. Write down the simple interest formula and change the formula so that the rate r is the subject. ii Find the annual flat rate of interest that applies to Chen's agreement. (Give your answer as a percentage correct to 1 decimal place.) il Suppose that Chen could negotiate a discount with the supplier so that his payments are reduced to $135 per month for 24 months. Determine the annual flat rate of interest (as a percentage correct to 1 decimal place) under these new conditions.
Chen hopes to eventually replace his old bicycle with a new one. The type of bicycle he wants has a cash price of $2700. Chen could enter into an agreement to buy one of these bicycles from a supplier where he pays a deposit of $200 and 24 monthly payments of $140. A flat rate of interest applies. What would be the best way to describe Chen's agreement: reducing balance loan, interest-only loan, hire purchase, cash payment? b. What is the total cost of the bicycle under this agreement? How much money would Chen actually borrow under this agreement and how much interest would he pay? C. Write down the simple interest formula and change the formula so that the rate r is the subject. ii Find the annual flat rate of interest that applies to Chen's agreement. (Give your answer as a percentage correct to 1 decimal place.) il Suppose that Chen could negotiate a discount with the supplier so that his payments are reduced to $135 per month for 24 months. Determine the annual flat rate of interest (as a percentage correct to 1 decimal place) under these new conditions.
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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part D
Transcribed Image Text:Question 1
Chen hopes to eventually replace his old bicycle with a new one. The type of bicycle he wants
has a cash price of $2700. Chen could enter into an agreement to buy one of these bicycles
from a supplier where he pays a deposit of $200 and 24 monthly payments of $140. A flat rate
of interest applies.
а.
What would be the best way to describe Chen's agreement:
reducing balance loan, interest-only loan, hire purchase,
cash payment?
b.
What is the total cost of the bicycle under this agreement?
с.
How much money would Chen actually borrow under this agreement and how much
interest would he pay?
i
Write down the simple interest formula and change the formula
so that the rate r is the subject.
ii
Find the annual flat rate of interest that applies to Chen's agreement. (Give
your answer as a percentage correct to 1 decimal place.)
i
Suppose that Chen could negotiate a discount with the supplier so that his
payments are reduced to $135 per month for 24 months. Determine the annual
flat rate of interest (as a percentage correct to 1 decimal place) under these
new conditions.
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