What is the amount of the equal annual end-of-year payments

Assignment Help Business Economics

Reference no: EM13839431

An engineer borrowed $3000 from the bank, payable in six equal end-of-year payments at 8%. The bank agreed to reduce the interest on the loan if interest rates declined in the United States before the loan was fully repaid. At the end of three years, at the time of the third payment, the bank agreed to reduce the interest rate from 8% to 7% on the remaining debt (years 4, 5 and 6).

a) Draw a Cash Flow Diagram (neatly by hand and with a straight edge or use EXCEL): label all items/values, and time increments.

b) What is the amount of the equal annual end-of-year payments for each of the first three years?

c) What is the amount of the equal annual end-of year payments for each of the last three years?

Reference no: EM13839431

Questions Cloud

A project that provides annual cash flows : A project that provides annual cash flows of $11,600 for 9 years costs $64,230 today. If the required return is 5 percent, the NPV for the project is $ and you would (Click to select) accept reject the project. At a discount rate of percent, you woul..

Consider the two production isoquants in the figure : Fetzer valves can be made in either China or the United States, but because labor in the United States is more skilled, on average, than labor in China, the production technologies differ. Consider the two production isoquants in the figure. Each rep..

Natural monopoly as the number of units produced increases : Identify which of the following statements is always true for a natural monopoly as the number of units produced (output) increases.

Cash flow table-showing-time increments-interest value : You have made arrangements to borrow $1,000 now and another $1,000 three years from now (End of Yr 3). The obligation is to be repaid at the end of four years. If the projected interest rates in years one, two, three, and four are 10%, 12%, 12%, and ..

What is the amount of the equal annual end-of-year payments : An engineer borrowed $3000 from the bank, payable in six equal end-of-year payments at 8%. The bank agreed to reduce the interest on the loan if interest rates declined in the United States before the loan was fully repaid. What is the amount of the ..

Manufacturing company purchased electrical services : A manufacturing company purchased electrical services for the next 5 years to be paid for with $70,000 now. The service after 5 years will be $15,000 per year beginning with the sixth year. the electrical company considered 15% compounded annually as..

Suppose consumers level of satisfaction : Suppose a consumer's level of satisfaction is given by AB2 and he/she has a total of $10 to spend on goods A and B. If the price of A is $1 and the price of B is $2, and assuming you can only purchase whole units (not fractional) of A and B, how many..

purchasing new sport utility vehicle : A young couple is purchasing a new sport utility vehicle. The price of the new vehicle is $28,300, sales tax is 7.5%, title and registration will cost $105. The dealer is offering a special finance rate of 1.9% APR for 36 months (compounded monthly)...

Find the optimal amount of good : Suppose that mux=10 and muy=20, further suppose that the consumers budget constraint can be expressed as 20x+10y=400. For this consumer, find the optimal amount of good x to buy.

User Account

All Pages