Engineering Economic Analysis
Engineering Economic Analysis
13th Edition
ISBN: 9780190296902
Author: Donald G. Newnan, Ted G. Eschenbach, Jerome P. Lavelle
Publisher: Oxford University Press
bartleby

Videos

Question
Book Icon
Chapter 3, Problem 5P
To determine

The interest and total amount due at the end of the loan for both simple and compound interest.

Expert Solution & Answer
Check Mark

Answer to Problem 5P

The interest and total amount due at the end of the loan for both simple and compound interest is shown in the table below.

SI As CI Ac
(a) $100 $1100 $1102.50 $102.5
(b) $450 $1950 $2007.34 $507.34
(c) $10000 $20000 $25937.42 $15937.42
(d) $562500 $81250 $203426.54 $178426.54
(e) $191000 $238750 $1830620.40 $1782870.40

Explanation of Solution

Given:

Loan Years Rate
(a) $1000 2 5%
(b) $1500 5 6%
(c) $10,000 10 10%
(d) $25,000 15 15%
(e) $47,750 20 20%

Concept used:

Write the expression to calculate simple interest.

SI=P×R×T100 ...... (I)

Here, simple interest is SI, principal amount is

P, interest rate is

R and time period is T.

Write the expression to calculate the amount due to simple interest.

As=P+SI ...... (II)

Here, amount due to simple interest is As.

Write the expression to calculate compound interest.

CI=P(1+R100)T ...... (III)

Here, compound interest is CI.

Write the expression to calculate the amount due to compound interest.

Ac=CIP ...... (IV)

Here, the amount due to compound interest is Ac. R.

Calculation:

Calculate the simple interest.

Substitute $1000 for P, 5 for and 2 for T in Equation (I).

SI=$1000×5×2100=$100

Calculate the amount due to simple interest.

Substitute $100 for SI and $1000 for P in Equation (II).

As=$1000+$100=$1100

Calculate the compound interest.

Substitute $1000 for P, 5% for R and 2 for T in Equation (III).

CI=$1000(1+5100)2=$1102.50

Calculate the amount due to compound interest.

Substitute $1102.5 for CI and $1000 for P in Equation (IV).

Ac=$1102.50$1000=$102.5

The values for the loan values are calculated and shown below in the table.

Loan Years Rate SI As CI Ac
(a) $1000 2 5% $100 $1100 $1102.50 $102.5
(b) $1500 5 6% $450 $1950 $2007.34 $507.34
(c) $10,000 10 10% $10000 $20000 $25937.42 $15937.42
(d) $25,000 15 15% $562500 $81250 $203426.54 $178426.54
(e) $47,750 20 20% $191000 $238750 $1830620.40 $1782870.40

Here, SI is calculated from Equation (I), As is calculated from Equation (II), CI is calculated from Equation (III) and Ac is calculated from Equation (IV).

Conclusion:

Thus, the interest and total amount is shown in the following table.

SI As CI Ac
(a) $100 $1100 $1102.50 $102.5
(b) $450 $1950 $2007.34 $507.34
(c) $10000 $20000 $25937.42 $15937.42
(d) $562500 $81250 $203426.54 $178426.54
(e) $191000 $238750 $1830620.40 $1782870.40

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
3. Consider a course allocation problem with strict and non-responsive preferences. Isthere a mechanism that is efficient and strategy-proof? If so, state the mechanismand show that it satisfies efficiency and strategyproofness. {hint serial dictatorship and show using example}4. Consider a course allocation problem with responsive preferences and at least 3students. Is there a mechanism that is efficient and strategy-proof that is not theSerial Dictatorship? If so, state the mechanism and show that it satisfies efficiencyand strategyproofness.5. Suggest a mechanism for allocating students to courses in a situation where preferences are non-responsive, and study its properties (efficiency and strategyproofness). Please be creative
3. Consider a course allocation problem with strict and non-responsive preferences. Isthere a mechanism that is efficient and strategy-proof? If so, state the mechanismand show that it satisfies efficiency and strategyproofness. {hint serial dictatorship}4. Consider a course allocation problem with responsive preferences and at least 3students. Is there a mechanism that is efficient and strategy-proof that is not theSerial Dictatorship? If so, state the mechanism and show that it satisfies efficiencyand strategyproofness.5. Suggest a mechanism for allocating students to courses in a situation where preferences are non-responsive, and study its properties (efficiency and strategyproofness). Please be creative
2. a) Consider a market where one firm (firm 1) currently produces, but a second firm (firm 2) is intending to enter and sell an identical product. The market has inverse demand given by p = 40 – Q, where Q is the total output sold in the market. Firm 1 has a marginal cost of 16 and firm 2 has a marginal cost of c < 16, with no fixed cost for either firm. Firm 2 has a choice of competing on price or quantity, with firms making their choices simultaneously (i.e. the market will be either a Bertrand or Cournot duopoly). If you were advising firm 2 on entering this market, how would you advise it to compete? To what extent would the size of firm 2’s cost advantage affect your advice?  b) Now assume that firm 2 is aware that other firms are considering entering the market, so the market may over time change from a duopoly to an oligopoly with more than two firms. This would not change the nature of competition (i.e. any additional firms would set price or quantity in line with the first…
Knowledge Booster
Background pattern image
Economics
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:9780190931919
Author:NEWNAN
Publisher:Oxford University Press
Text book image
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Text book image
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Text book image
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Text book image
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education
Break Even Analysis (BEP); Author: Tutorials Point (India) Ltd.;https://www.youtube.com/watch?v=wOEkc3O_Q_Y;License: Standard YouTube License, CC-BY
Cost Volume Profit Analysis (CVP): calculating the Break Even Point; Author: Edspira;https://www.youtube.com/watch?v=Nw2IioaF6Lc;License: Standard Youtube License