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Q3: Toyota company supplies major automobile components to auto manufacturers worldwide. An engineer is on a Toyota committee to evaluate spare parts. Three sellers of
Q3: Toyota company supplies major automobile components to auto manufacturers worldwide. An engineer is on a Toyota committee to evaluate spare parts. Three sellers of these spare parts provided their interest rate as follow: a- Seller # 1: 7% per year, compounded semiannually b- Seller #2: 5% per 3 months, compounded quarterly C- Seller #3: 9.5% per year, compounded monthly Toyota will make payments on a semiannual basis only. The engineer is confused about the effective interest rates what they are annually and over the payment period of 6-months. (a) Determine the effective rate for each bid on the basis of semiannual payments, and construct cash flow diagrams similar for each seller rate. (b) What are the effective annual rates? These are to be a part of the final bid selection. (c) Which bid has the lowest effective annual rate
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