# other - Balance at EOY 8 = \$100,000(F/P 8 8 \$8,880(F/A 8 8...

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ECT 7230 Engineering Economics Suggested Solutions for Assignment 2 Q4-28. Kris borrows money in her senior year to buy a new car. The car dealership allows her to defer payments for 12 months, and Kris makes 36 end-of-month payments thereafter. If the original note (loan) is for \$24,000 and interest is ½% per month on the unpaid balance, how much will Kris’ payments be? Solution by hand: A= \$24,000*(F/P, 0.5%, 12)*(A/P, 0.5%, 36) =\$775.16. Q4-39. An individual is borrowing \$100,000 at 8% interest compounded annually. The loan is to be repaid in equal annual payments over 30 years. However, just after the eighth payment is made, the lender allows the borrower to triple the annual payments. The borrower agrees to this increased payment. If the lender is still charging 8% per year, compounded annually, on the unpaid balance of the loan, what is the balance still owed just after the twelfth payment is made? Solution by hand: Original payments = A = \$100,000 (A/P, 8%, 30)=\$8,880

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Unformatted text preview: Balance at EOY 8 = \$100,000 (F/P, 8%, 8) - \$8,880 (F/A, 8%, 8) = \$100,000 (1.8509) - \$8,880 (10.6366) = \$90,636.99 Or P 8 =\$8,880 (P/F, 8%, 22) = \$8,880(10.2007)=\$90636.99 New payment = \$8,880 *3 =\$26,640 Balance at EOY 12 = \$90,636.99 (F/P, 8%, 4) - \$26,640 (F/A, 8%,4) = \$90,636.99 (1.3605) - \$26,640 (4.5061) =\$ 3,269.12 Q4-61. Suppose that the parents of a young child decide to make annual deposits into a saving account, with the first deposit being made on the childs 5 th birthday and the last deposit being made on the 15 th birthday. Then, starting on the childs 18 th birthday, the withdrawals as shown will be made. If the effective annual interest rate is 8% during this period of time, what are the annual deposits in years 5 through 15? Use a uniform gradient amount (G) in your solution. Please see the following figure. Solution by hand: A= [\$2,000 (P/A, 8%, 4) +\$400 (P/G, 8%, 4)] (P/F, 8%, 2) (A/F, 8%, 11) = [\$2,000(3.3121)+\$400(4.650)](0.8573)(0.0601)=\$437.14...
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## This note was uploaded on 11/02/2009 for the course PHYS 172 taught by Professor ? during the Spring '08 term at Purdue.

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other - Balance at EOY 8 = \$100,000(F/P 8 8 \$8,880(F/A 8 8...

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