You want to expand your garage. A contractor, who was highly recommended, says t

ID: 1194530 • Letter: Y

Question

You want to expand your garage. A contractor, who was highly recommended, says that he will do the whole job (new roof, automatic garage door, insulation and more) for $55,000. He offers you two choices: 1) You can pay the $55,000 cash, now. OR 2) You can make $11,000 down payment now, and pay $1200 each month for four years. Questions: A. At what monthly bank interest rate would the two choices be equivalent? [2.0] B. What is the nominal annual rate? [0.5] [2.5] Total You want to expand your garage. A contractor, who was highly recommended, says that he will do the whole job (new roof, automatic garage door, insulation and more) for $55,000. He offers you two choices: 1) You can pay the $55,000 cash, now. OR 2) You can make $11,000 down payment now, and pay $1200 each month for four years. Questions: A. At what monthly bank interest rate would the two choices be equivalent? [2.0] B. What is the nominal annual rate? [0.5] [2.5] Total

Explanation / Answer

A) 55000= 11000 + 1200/(1+x) + 1200/(1+x)^2 +.... + 1200/(1+x)^48

44000= 1200/(1+x) + 1200/(1+x)^2 +.... + 1200/(1+x)^48

Solving for x we get, x= 1.157

Hence, the monthly interest rate = 1.157 %

B.Nominal annual rate = 1.157*12%

= 13.88%

Navigate

You want to examine whether income level is associated with the subscription of

You want to express a rare human protein in bacteria so that you can make large

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.

You want to expand your garage. A contractor, who was highly recommended, says t

Question

Explanation / Answer

Related Questions

Navigate