The Fly-by-Night finance company advertises a "bargain 6% plan" for financing the purchase of automobiles. To the amount of the loan being financed, 6% is added for each year money is owed. This total is then divided by the number of months over which the payments are to be made, and the result is the amount of the monthly payments. For example, a woman purchases a $10,000 automobile under this plan and makes an initial cash payment of $2,500. She wishes to pay the $7,500 balance in 24 monthly payments: Find the IRR and Effective Annual Interest rate. Purchase price -Initial payment = Balance due, (Po) +6% finance charge = 0.06 × 2 years × $7,500 = Total to be paid .. Monthly payments (A) = $8,400/24 = $10,000 2,500 7,500 900 8,400 $350

The Fly-by-Night finance company advertises a "bargain 6% plan" for financing the purchase of automobiles. To the amount of the loan being financed, 6% is added for each year money is owed. This total is then divided by the number of months over which the payments are to be made, and the result is the amount of the monthly payments. For example, a woman purchases a $10,000 automobile under this plan and makes an initial cash payment of $2,500. She wishes to pay the $7,500 balance in 24 monthly payments: Find the IRR and Effective Annual Interest rate. Purchase price -Initial payment = Balance due, (Po) +6% finance charge = 0.06 × 2 years × $7,500 = Total to be paid .. Monthly payments (A) = $8,400/24 = $10,000 2,500 7,500 900 8,400 $350

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Steve promises to pay Amanda $2,000 in four years and another $3,000 four years later for a loan of $2,000 from Sandy today. What is the interest rate that Sandy is getting? Assume interest is compounded monthly.
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