Problems 681
20.22.You need to borrow $12,000 to buy a car, so you visit
two banks and are given two alternatives. The first
bank allows you to pay $2595.78 at the end of each
year for six years. The first payment is to be made at
the end of the first year. The second bank offers equal
monthly loan payments of $198.87, starting at the
end of first month. What are the interest rates that
the banks are charging? Which alternative is more
attractive?
20.23.What is the value of Xif the given cash flow diagrams
are equivalent. Assume i8%.
20.24.Your future company has been presented with an
opportunity to invest in a project with the following
cash flow for ten years. If the company would like to
make at least 8% on its investment, would you invest
in the project?10
$7000 $7000
021 3456789
$5000
$2000
Problem 20.18
Year Amount
1 $1,000,000
2 $1,000,000
3 $1,000,000
4 $1,000,000
5 $1,000,000
6 $1,000,000
7$?Problem 20.23
charges you according to a nominal rate of 8%. The
loan is payable in 60 months. (a) Calculate the
monthly payments. (b) Assume the bank charges a
loan fee of 4.5% of the loan amount payable at the
time they give you the loan. What is the effective
interest rate that you actually are being charged?
20.21.Imagine the company that you work for borrows
$8,000,000 at 8% interest, and the loan is to be paid
in seven years according to the following schedule.
Determine the amount of the last payment.134562 01 23456
0
$3000
$10000
$2000 X
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