ENGINEERING ECONOMY(LOOSELEAF)
ENGINEERING ECONOMY(LOOSELEAF)
8th Edition
ISBN: 9781260152814
Author: Blank
Publisher: MCG
Question
Book Icon
Chapter 4, Problem 44P

(a):

To determine

Calculate the equivalent monthly value.

(a):

Expert Solution
Check Mark

Explanation of Solution

The borrowing (B) is $80,000. The interest rate (i1) is 6% per year and it is compounded semiannually for two payments. The effective interest rate 1 (Ei1) is 0.5% (612). The interest rate (i2) is 4.2% per year and it is compounded semiannually for third payments. The effective interest rate 2 (Ei2) is 0.35% (4.212). The time period (n) is 60 months (12×5).

The equivalent monthly value (A) can be calculated as follows:

A=B(Ei1(1+Ei1)n(1+Ei1)n1)=80,000(0.005(1+0.005)60(1+0.005)601)=80,000(0.005(1.3488502)1.34885021)=80,000(0.00674430.3488502)=80,000(0.01933)=1,546.4

The equivalent monthly value is $1,546.4.

(b):

To determine

Calculate the current balance.

(b):

Expert Solution
Check Mark

Explanation of Solution

The interest payment in the first year can be calculated as follows:

Interest payment 1=B×Ei1=80,000×0.005=400

The interest payment for the first year is $400.

The interest payment in the second year can be calculated as follows:

Interest payment 2=(B(AInterest payment 1))×Ei=(80,000(1,546.40400))×0.005=(80,0001,146.40)×0.005=78,853360×0.005=394.27

The interest payment for the second year is $394.27.

The current principal payment (CP) can be calculated as follows:

CP=B((A×2)(Interest payment 1Interest payment 2))=80,000((1,546.4×2)400394.27)=80,000(3,092.8400394.27)=80,0002,298.53=77,701.47

The current principal payment is $77,701.47.

(c):

To determine

Calculate the total interest payment.

(c):

Expert Solution
Check Mark

Explanation of Solution

The total interest payment for the first two years can be calculated as follows:

Total interest payment=(Interest payment 1+Interest payment 2)=400+394.27=794.27

The total interest payment for the first two years is $794.27.

(d):

To determine

Calculate the equivalent monthly value.

(d):

Expert Solution
Check Mark

Explanation of Solution

The borrowing (B) is $80,000. The interest rate (i1) is 6% per year and it is compounded semiannually for two payments. The effective interest rate 1 (Ei1) is 0.5% (612). The interest rate (i2) is 4.2% per year and it is compounded semiannually for third payment. The effective interest rate 2 (Ei2) is 0.35% (4.212). The time period (n) is 60 months (12×5).

The equivalent monthly value (A) for second loan can be calculated as follows:

A=Current principal payment(Ei2(1+Ei2)n(1+Ei2)n1)=77,701.47(0.0035(1+0.0035)60(1+0.0035)601)=77,701.47(0.0035(1.233226)1.2332261)=77,701.47(0.0043160.233226)=77,701.47(0.018506)=1,437.94

The equivalent monthly value is $1,437.94.

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
Please solve this, no words or explanations.
Please solve this, no words or explanations.
17. Given that C=$700+0.8Y, I=$300, G=$600, what is Y if Y=C+I+G?

Chapter 4 Solutions

ENGINEERING ECONOMY(LOOSELEAF)

Knowledge Booster
Background pattern image
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