# HW 8 - The price of the entertainment center is \$12,000 Can...

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Homework Set No. 08 (Eng Econ Anal) 1. We know that a certain piece of equipment will cost \$100,000 in 5 years. How much does it cost today if the inflation rate is 3%/yr? 2. An automobile may be purchased with a \$3000 down payment now and 60 monthly payments of \$280. If the interest rate is nominally 6%/yr, what is the price of the automobile? 3. You have a job that leaves you with \$300 per month in disposable income. You decide to use the money to buy the ultimate entertainment center. Before looking at entertainment centers, you arrange a 100% loan with terms of \$300/mo for 36 months at 9% annual interest. What is the maximum purchase price you can afford? 4. You find an entertainment center you like, and the store offers to arrange financing. Their terms are 9% annual interest for 60 months and no down payment.
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Unformatted text preview: The price of the entertainment center is \$12,000. Can you afford to buy it with your \$300/mo disposable income? 5. You really want this particular entertainment center. You decide to try and negotiate a different interest rate so that you can spend less per month. What is the highest interest rate you can accept, given a 60-month term and \$250/mo payments? 6. You are arranging a six-year contract to buy a quantity of wine to sell in your store. You will pay for the entire contract up front. Six suppliers offer you the following contract terms. For an annual interest rate of 8%, which contract should be selected? Option Cost Uniform (constant) Annual Profit A \$10,000 \$3,000 B \$17,500 \$4,800 C \$27,500 \$6,700 D \$30,000 \$6,900 E \$40,000 12,160 F \$50,000 12,160 ----- END -----...
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