In an equipment acquisition proposal, MKBK Enterprises has worked out to deal on

Question

In an equipment acquisition proposal, MKBK Enterprises has worked out to deal on the interest rate with the vendor. The equipment is being financed for 10 years with monthly payments as follows: The interest rate is 1.1% per month for the first 30 payments and for the rest of the payments the interest rate would be reduced to ¾ % per month The equipment cost $1,000,000 Determine the amount of 31-st monthly payment. on the original rate. 7 it with the new reduced rate which is a new A value to be finished within se payments. Answer

Explanation / Answer

Answer:-

A30 =1,000,000((A/P,1.1%,120)

(A/P,1.1%,120) =[i(1+i)n / (1+i)n – 1] = [0.011(1+0.011)120 / (1+0.011)120 – 1] = 0.01504927

A30 =1,000,000(0.015049)

A30 =15049

A31 = [1,000,000((F/P,1.1%,30) – 15049(F/A,1.1%,30)]*(A/P,3/4%,90)

(F/P,1.1%,30)=(1+i)n = (1+0.011)30 = 1.388464

(F/A,1.1%,30)= [(1+i)n-1]/i = [(1+0.011)30 -1]/0.011 = 35.31492

(A/P,3/4%,90)= =[i(1+i)n / (1+i)n – 1] = [0.0075(1+0.0075)90 / (1+0.0075)90 – 1]=0.01532

A31 = = [1,000,000(1.388464) – 15049(35.31492)]*( 0.01532)

A31 =[1388464-531454.3]0.01532

A31 =$13129.39

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