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Alla [95]
3 years ago
7

Consider this case: Mildred’s Brewing Corp. needs to take out a one-year bank loan of $500,000 and has been offered loan terms b

y two different banks. One bank has offered a simple interest loan of 11% that requires monthly payments. The loan principal will be paid back at the end of the year. Another bank has offered 8% add-on interest to be repaid in 12 equal monthly installments. Based on a 360-day year, what will be the monthly payment for each loan for November? (Hint: Remember that November has 30 days.) Value Simple interest monthly payment Value Add-on interest monthly payment
Business
1 answer:
11Alexandr11 [23.1K]3 years ago
3 0

Answer:

Mildred's Brewing Corp.

Monthly Payment for each loan for November:

a) Simple Interest = $55,000/12

= $4,583

b) Value Add-on interest  monthly payment

= $43,494.31 ($521,931.68/12)

Explanation:

a) Data:

Bank loan = $500,000

Terms by bank one:

Simple interest of 11% paid monthly

Loan principal to be repaid at the end of the year.

Terms by bank two:

Add-on (Compound) interest = 8%

Repayment of interest and loan principal in 12 equal monthly installments.

b) Total Simple Interest Calculation:

Monthly Simple interest = ($500,000 x 11% )

= $55,000

c) Add-on Interest Calculation:

Using an online calculator, the total add-on interest will be $21,932.68 at an effective interest rate of 0.667% compounded monthly or 8%/12.

Principal =                $500,000.00

Total interest               $21,931.68

Principal + Interest  $521,931.68

Monthly Repayment = $43,494.31 ($521,931.68/12)

d) The simple interest option will cost $55,000 in simple interest and the loan repayment at year-end of $500,000.  The Add-on interest with equal monthly repayment of interest and principal will be $43,494.31, which costs $21,931.68 in total compound interest.

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Dayna’s Doorstops, Inc. (DD) is a monopolist in the doorstop industry. Its cost is C  100  5Q  Q2, and demand is P  55  2Q.
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Answer:

Explanation:

Given the following data about Dayna's Doorstep Inc(DD) :

Cost given by; C = 100 - 5Q + Q^2

Demand ; P = 55 - 2Q

A.) Set price to maximize output;

Marginal revenue (MR) = marginal cost (MC)

MR = taking first derivative of total revenue with respect to Q; (55 - 2Q^2)

MC = taking first derivative of total cost with respect to Q; (-5Q + Q^2)

MR = 55 - 4Q ; MC = 2Q - 5

55 - 4Q = 2Q - 5

60 = 6Q ; Q = 10

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Output

35(10) - [100-5(10)+10^2]

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B.) Here,

Marginal cost = Price

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