Answer:
D. $11,843.37
Explanation:
We will adjust by inflation the principal, and then calculate the interest.
Inflation is 0.025 every six month, and it is compounding interest.
Our rate will be for six month as well. Because TIPs pay interest semianually as well.
11,843.36903
Answer:
more intense the competitive pressures posed by substitute products.
Explanation:
The lower the user's switching costs: the more intense the competitive pressures posed by substitute products.
Switching costs can be defined as the cost of a consumer switching from a product to a substitute good.
Therefore when such switching costs are low, it will be easier to switch from one product to another, implying that the competitive pressure from substitute goods are higher.
Given:
Future value, F=60508.29
Monthly payment, A = 165
Compounding period = month
Number of periods, n = 12*12=144
interest per period = i [ to be found ]
We have the relationship
F=A((1+i)^n-1)/i
but there is no explicit formula for i for given F, A and n.
We need to solve a non-linear equation for the value of i, the monthly interest rate.
One of the ways is to solve it by fixed iteration, i.e.
1. using the given relation, express i in terms of other parameters.
2. select an initial value of i
3. evaluate i according the equation in step 1 until the value is stable.
Here we will use the relationship to express
i=((60508.29*i)/165+1)^(1/144)-1 [ notice that i is on both sides of = sign ]
using an initial value of i=0.01 (about 1% per month).
Successively, we get
i=((60508.29*0.01)/165+1)^(1/144)-1=0.01075571
i=((60508.29*0.01075571)/165+1)^(1/144)-1=0.011160681, similarly
i=0.0113685
i=0.0114728
i=0.0115246
i=0.0115502
i=0.0115628
i=0.0115690
i=0.0115720
Assuming the above has stablilized, and the APR is 12 time the above value, namely
Annual percentage rate = 0.01157205998210142*12=0.13886=13.89%
Okay. So it's $10,000 per year, which is $100,000 in 10 years. I'm not so sure how to solve it exactly, but I found a lump sum calculator online. I put the information on that and according to the calculator, today's payment in a lump sum would be $50,894.93. The future value is $100,000 with 10 periods (in this case, years) of the interest rate of 7% once per year. I think that the answer is $50,894.93.
