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(a)
Monthly interest rate.
(a)
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Answer to Problem 89P
Monthly Interest rate is 0.98%.
Explanation of Solution
Given information:
Loan amount: $1,000
Duration: 12 Months
Amount of monthly payment is $ 93.12.
Loan amount is $1,000, Amount of monthly payment is $93.12 and Duration is12 Months.
Conclusion:
Hence the monthly interest rate is calculated.
(b)
Nominal annual interest rate.
(b)
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Answer to Problem 89P
Nominal annual interest rate is 11.744%.
Explanation of Solution
Given information:
Loan amount : $1,000
Duration: 12 Months
Amount of monthly payment is $ 93.12.
Loan amount is $1,000, Amount of monthly payment is $ 93.12 and Duration is12 Months.
Nominal annual interest rate is calculated as periodic interest rate expressed in terms of a year. For instance, a periodic monthly interest rate is expressed in terms of a year by multiplying the same by 12.
Interest rate per month is calculated at 0.98% per month. Hence the annual interest rate is calculated as Monthly interest rate multiplied by 12.
Conclusion:
Hence the nominal annual interest rate is calculated.
(c)
Effective annual interest rate.
(c)
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Answer to Problem 89P
Effective annual interest rate is 12.3972%.
Explanation of Solution
Given information:
Loan amount : $1,000
Duration: 12 Months
Amount of monthly payment is $ 93.12.
Loan amount is $1,000, Amount of monthly payment is $ 93.12 and Duration is12 Months.
Nominal annual interest rate is calculated as periodic interest rate expressed in terms of a year. For instance, a periodic monthly interest rate is expressed in terms of a year by multiplying the same by 12.
Interest rate per month is calculated at 0.9787% per month. Hence the annual interest rate is calculated as Monthly interest rate multiplied by 12.
Effective Interest rate is calculated using the following formula:
Thus, effective interest rate is 12.3972%
Conclusion:
Hence the Effective annual interest rate is calculated.
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Chapter 4 Solutions
ENGR.ECONOMIC ANALYSIS
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