(a)
Effective annual interest rate.
Answer to Problem 93P
Effective annual interest rate is 12.36%.
Explanation of Solution
Given information:
Loan amount: $5,000
Interest rate: 12% per annum, compounded semi-annually.
Loan amount is $5,000 and Rate of Interest is 12% compounded semi-annually.
Effective annual interest rate is calculated as periodic interest rate expressed in terms of a year.
Effective Interest rate is calculated using the following formula:
Substituting the above values in the equation we get effective interest rate as 12.36%.
Conclusion:
Hence the Effective annual interest rate is calculated.
(b)
Amount of semi-annual payment.
Answer to Problem 93P
Amount of semi-annual payment is $ 1442.96.
Explanation of Solution
Given information:
Loan amount: $5,000
Interest rate: 12% per annum, compounded semi-annually.
Duration: 4 Periodic repayments.
The periodic payment to be made is calculated as per the following formula:
Loan amount is $5,000, Interest rate per period is 12.36% per annum, compounded semi-annually, and Duration is 4 repayments.
Substituting values in the above equation, we get the periodic payment as $1,448.91.
Conclusion:
Hence the amount of monthly payment is calculated.
(c)
Total interest paid.
Answer to Problem 93P
Total interest paid is $795.64.
Explanation of Solution
Given information:
Loan amount: $5,000
Interest rate: 12% per annum, compounded semi-annually.
Duration: 4 Periodic repayments.
The periodic payment to be made is calculated as per the following formula:
Loan amount is $5,000, Interest rate per period is 12% per annum, compounded semi-annually, and Duration is 4 repayments.
Substituting values in the above equation, we get the periodic payment as $1,448.91.
Total interest paid is calculated using the following formula:
Hence the total interest paid is $795.64.
Conclusion:
Hence the total interest paid is calculated.
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Chapter 4 Solutions
ENGR.ECONOMIC ANALYSIS W/DASHBOARD
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