ENGIN 120 Midterm: e120-fa2012-mt2-Arbel-soln
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Midterm 2 solution: since there is a 20% down payment, the loan amount is 80% 5m = 4m peso. (a) the yearly payment is. A = 4m(a/p, 40%, 15) = 4m . 15 = 1, 610, 351 (b) since the nominal interest rate is 40%, the e ective monthly rate is 40%/12 = 3. 33%. A = 4m(a/p, 3. 33%, 15 12) = 4m . The equivalent annual e ective rate is er 1 = 0. 105 > 0. 1 = r. (b) true. The e ectively monthly rate is er/12 1 = 1. 005%. The balance after the tenth monthly payment is made is. (p/a, 1. 005%, 14) = . 81 > . 84 = . 68/2 (c) false. The present value of ten years from now is. (p/f, 4%, 20) = 6= (d) false. For example, when n = 2, we have (p/a, i%, n) = = (p/f, i%, 1) which is not true in general.
