Kilroy Corporation provides services to a customer for $1,000. The customer complained that there was a slight defect in the ser
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Answer:
Task A:
<u>What is the effecting annual rate changed on this loan?</u>
Answer is 3.03%
<u>Task B: </u>
<u>What would be the quarterly payment on this loan?</u>
Answer is $5,403.06
<u>Task C:</u>
<u>Dr. Zoidberg also discovers that instead of the special promotional rate he can make an additional down payment of $20,000 that would lower his loan amount accordingly (i.e. by $20,000). At what APR would Dr. Zoidberg have the same quarterly payment with this option as with the initial promotional rate of 3%?</u>
Answer is 12.21%
<u>Task D</u>
<u>Dr. Zoidberg finds that he can get 1.5% APR if he elects option (c). What will his quarterly payment be under this option?</u>
The answer is $4,159.37
<u>Task E:</u>
<u>Now assume that that payment frequency changes to annual, preserving the same EAR. What is his payment now?</u>
The answer is $21,835.46
Explanation:
<h2>Task A: </h2><h3>What is the effecting annual rate changed on this loan?</h3>Solution:
Effective annual rate = (1 + (APR/n))ⁿ - 1
where
n = number of compounding periods per year = 4 (compounding quarterly)
APR = 3%
Effective annual rate = (1 + (3%/4))⁴ - 1
Effective annual rate = 3.03% (answer).
<h2>Task B: </h2><h3>What would be the quarterly payment on this loan?</h3>Solution:
Quarterly loan payment is calculated using PMT function in Excel :
Rate = 3% / 4 (converting annual rate into Quarterly rate)
nper = 5*4 (5 year loan with 12 Quarterly payments each year)
pv = 100000 (loan amount)
PMT Formula = PMT(3%/4,5*4,100000)
PMT is calculated to be $5,403.06 (answer)
Note: PMT calculation has been attached.
<h2>Task C:</h2><h3>Dr. Zoidberg also discovers that instead of the special promotional rate he can make an additional down payment of $20,000 that would lower his loan amount accordingly (i.e. by $20,000). At what APR would Dr. Zoidberg have the same quarterly payment with this option as with the initial promotional rate of 3%?</h3>Solution
The quarterly rate to have the same quarterly payment is calculated using RATE function in Excel :
nper = 5*4 (5 year loan with 12 Quarterly payments each year)
pmt = -5403.06 (Quarterly payment. This is entered with a negative sign because it is a payment)
pv = 80000 (loan amount)
RATE is calculated to be 3.05%. This is the quarterly rate. To get APR, we multiply by 4.
Formula for APR = RATE(5*4,C1,80000)*4
APR = 12.21% (answer)
<h2>Task D</h2><h3>Dr. Zoidberg finds that he can get 1.5% APR if he elects option (c). What will his quarterly payment be under this option?</h3>Solution:
Quarterly loan payment is calculated using PMT function in Excel :
rate = 1.5% / 4 (converting annual rate into Quarterly rate)
nper = 5*4 (5 year loan with 12 Quarterly payments each year)
pv = 80000 (loan amount)
PMT formula: PMT(1.5%/4,5*4,80000)
PMT is calculated to be $4,159.37
<h2>Task E</h2><h3>Now assume that that payment frequency changes to annual, preserving the same EAR. What is his payment now?</h3>Solution:
PMT = PMT(3%,5,100000)
PMT = $21,835.46
Answer:
other countries have a comparative advantage over Guatemala in the production of coffee, and Guatemala will import coffee.
Explanation:
This question is incomplete. Please check the attached image for a complete question.
A country has comparative advantage in the production of a good or service If it produces the good or service at a lower opportunity cost when compared to its trading partners.
The price of Guatemala's coffee is higher when compared to the world price of coffee without international trade. It shows that Guatemala doesn't have a comparative advantage in the production of coffee. Guatemala should stop producing coffee and import instead. This would enable Guatemala focus more resocurces on the production of good for which it has comparative advantage.
I hope my answer helps you
