5. Present value with periodic rates. Let’ s follow up with Sam Hinds, the dentist, and his remodeling project( Chapter 4, Problem 12). The cost of the equipment for the project is $ 18,000, and he will finance the purchase with a 7.5 % loan over six years. Originally, the loan called for annual payments. Redo the payments based on quarterly payments( four per year) and monthly payments( twelve per year). Compare the annual cash outflows of the two payments. Why does the monthly payment plan have less total cash outflow each year?
Original Problem from Chapter 4, Problem 12 to go with Chapter 5 Problem 5:
12. Payments. Sam Hinds, a local dentist, is going to remodel the dental reception area and add two new workstations. He has contacted A-Dec, and the new equipment and cabinetry will cost $ 18,000. A-Dec will finance the equipment purchase at 7.5 % over a six-year period. What will Hinds have to pay in annual payments for this equipment?
Chapter 5: Problem 7
7. Future value with periodic rates. Matt Johnson delivers newspapers and is putting away $ 15.00 every month from his paper route collections. Matt is eight years old and will use the money when he goes to college in ten years. What will be the value of Matt’ s account in ten years with his monthly payments if he is earning 6 %( APR), 8 %( APR), or 12 %( APR)?
Chapter 5: Advanced Problem 1a & 1b
1. Monthly amortization schedule. Sherry and Sam want to purchase a condo at the coast. They will spend $ 650,000 on the condo and are