What is one benefit and one limitation of loss aversion
1 answer:
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Answer:
a) $370
b) $305 is from interest; $3695 comes from deposits
Step-by-step explanation:
(a) The formula variables are not defined here, so choosing the appropriate formula is difficult. I worked through the "A =" formula because I'm used to seeing a formula in which A is the payment amount. Not so, here.
Here, P is the payment amount. Since you're asked to find the amount of payment, you want to choose and evaluate the "P=" formula. Payments and compounding are 2 times per year, so n=2, and the term is 5 years, so t=5. The interest rate, r, is 3.5%, or 0.035.
Then your formula evaluates to ...
... P = A((1 +r/n)^(nt) -1)/(r/n) = 4000·0.0175/(1.0175^(2·5) -1) ≈ 369.50
Part A wants the amount rounded up to the nearest dollar, so $370.
(b) 10 payments of $369.50 will total $3695.00. This is the amount from payments. The remainder, $4000 -3695 = $305 is from interest.
