Upon graduation, Steven purchases a new home theater system for his apartment. To finance the system, he

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Upon graduation, Steven purchases a new home theater system for his apartment. To finance the system, he

‘‘borrows’’ \($5\),000 from a new credit card at 21 percent per year compounded monthly. He fully intends to pay off the

‘‘loan’’ in 1 year while making monthly payments. Develop an Excel® table to illustrate the payment amounts and schedule for the loan, assuming payback follows

a. Plan 1: Pay the accumulated interest at the end of each interest period and repay the principal at the end of the loan period.

b. Plan 2: Make equal principal payments, plus interest on the unpaid balance at the end of the period.

c. Plan 3: Make equal end-of-period payments.

d. Plan 4: Make a single payment of principal and interest at the end of the loan period.

e. A different plan: Pay $X in principal at the end of months 1, 2, and 3; pay \($2\)X at the end of months 4, 5, and 6;

then \($3\)X at 7, 8, 9; and finally \($4\)X at 10,11,12. In addition, pay the accumulated interest at the end of each interest period.

Section 3.3

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Principles Of Engineering Economic Analysis

ISBN: 9781118163832

6th Edition

Authors: John A. White, Kenneth E. Case, David B. Pratt

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