Answer: See explanation
Explanation:
The effective price of the transaction to Branson based on the interest rate given will be:
1. PV = FV [PVF6,2] = $10,000(0.89) = $8,900
Therefore, $8,900 + $10,000 = $18,900
Effective Discount will be:
= (20000 - 18900) / 20000 × 100
= 1100/20000 × 100
= 0.055
= 5.5%
2) PV = FV [PVF8,2] = $10,000(0.8573) = $8,573
Therefore, $8,573 + $10,000 = $18,573
Effective Discount will be:
= (20000 - 18573)/20000 × 100
= 1427/20000 × 100
= 0.07135
= 7.135%
3) PV = FV [PVF10,2] = $10,000(0.8264) = $8,264
Therefore, $8,264 + $10,000 = $18,264
Effective Discount will be:
= (20000 - 18264)/20000 × 100
= 1736/20000 × 100
= 0.0868 × 100
= 8.68%
4) PV = FV [PVF12,2] = $10,000(0.7972) = $7,972
Therefore, $7,972 + $10,000 = $17,972
Effective Discount will be:
= (20000 - 17972)/20000 × 100
= 2028/20000 × 100
= 0.1014 × 100
= 10.14%
