Your money is tied up and you need to borrow ($10),000. The following two alternatives are available
Question:
Your money is tied up and you need to borrow \($10\),000. The following two alternatives are available at different banks: (1) Pay \($3\),311.61 at the end of each year for 5 years, starting at the end of the first year (5 payments total at 18 percent nominal per year compounded monthly which equates to 19.56 percent effective); or (2) pay \($253.93\) at the end of each month for 5 years, starting at the end of the first month (60 payments total at 18 percent nominal per year compounded monthly). Which will result in the smaller PW of payments to you if
a. your TVOM is 9 percent nominal per year compounded monthly?
b. your TVOM is 25 percent nominal per year compounded monthly?
Step by Step Answer:
Principles Of Engineering Economic Analysis
ISBN: 9781118163832
6th Edition
Authors: John A. White, Kenneth E. Case, David B. Pratt