Determine the annual inflation-free interest rate for bank

Assignment Help Econometrics

Reference no: EM13209752

suppose that you just purchased a used car worth $12000 in today's dollars.assume also that to finance the purchase you borrowed $10000 from a local bank 9% compounded monthly over two years. the bank calculated your monthly payment at $456.85 Assume that average general inflation will run at 0.5% per month over the next two years.

a) determine the annual inflation-free interest rate (i') for the bank

b) what equal monthly payment in terms of constant dollar over the next two years are equivalent to the series of actual payments to be made over the life of the loan?

Reference no: EM13209752

Questions Cloud

How return split up between current and capital-gains yeild : a Calculate the percentage return on the security if the payoff to the security in one year is $1,000, $1,500, $2,000, or $2,500. (Note: This is the total amount returned to the investor, so you may just calculate the total return and not worry

Distinguished conceptually in organizational practice : "How can racism and discrimination be distinguished conceptually in organizational practice? In your view, to what extent and in what ways are racism and discrimination practiced in contemporary organizations?

Explain solution is fed through an ion-exchange column : A 1.000-mL aliquot of a solution containing Cu2 and Ni2 is treated with 25.00 mL of a 0.03632 M EDTA solution. The solution is then back titrated with 0.02254 M Zn2 solution at a pH of 5. A volume of 18.39 mL of the Zn2 solutio..

Discuss the birth story of the buddha : Discuss four virtues that are taught in Confucian ethics, including the Five Constant Relationships. How might the culture of the United States be changed if these four virtues would be given primary focus in society?

Determine the annual inflation-free interest rate for bank : suppose that you just purchased a used car worth $12000 in today's dollars.assume also that to finance the purchase you borrowed $10000 from a local bank 9% compounded monthly over two years. the bank calculated your monthly payment at $456.85

Situation at fort sumter : President Lincoln's decision on what to do about the situation at Fort Sumter in the first weeks of his administration can be best characterized as

Compute the resulting molarity sodium chloride solution : calculate the resulting molarity when 50.0ml of 2.13M sodium Chloride solution is mixed with 80.0ml of 1.45M

Find the amount of the companys annual payment : a company is considering buying workstation computers to support its engineering staff. in todays dollars, it is estimated that the maintenance cost for the computers (paid at the end of each year) will be $25000, $30000, $32000, $35000, and $4000..

Measure of disease frequency : Which type of measure of disease frequency best describes each of the following scenarios?

User Account

All Pages