Suppose that you borrow $42,500 at 11.4% compounded monthly over seven years. Knowing that the 11.4% represents the market interest rate, you realize that the monthly payment in actual dollars will be $736.67. If the average monthly general inflation rate is expected to be 0.6%, determine the equivalent equal monthly payment series in constant dollars.

Suppose that you borrow $42,500 at 11.4% compounded monthly over seven years. Knowing that the 11.4% represents the market interest rate, you realize that the monthly payment in actual dollars will be $736.67. If the average monthly general inflation rate is expected to be 0.6%, determine the equivalent equal monthly payment series in constant dollars.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Suppose that you borrow $42,500 at 11.4% compounded monthly over seven years. Knowing that
the 11.4% represents the market interest rate, you realize that the monthly payment in actual dollars
will be $736.67. If the average monthly general inflation rate is expected to be 0.6%, determine
the equivalent equal monthly payment series in constant dollars.

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