Answer:
The correct option is c. An amount equal to or greater than $25,000 but less than $36,000.
Step-by-step explanation:
Note: This question is not complete. The complete question is therefore provided before answering the question as follows:
Amazon Rafting just bought a new trailer. To pay for the trailer, the company took out a loan that requires Amazon Rafting to pay the bank a special payment of $8,700 in 5 years and also pay the bank regular payments of $4,100 each year forever. The interest rate on the loan is 14.3 percent per year and the first $4,100 yearly payment will be paid in one year from today. What was the price of the trailer?
a. An amount less than $14,000 or an amount equal to or greater than $62,000
b. An amount equal to or greater than $14,000 but less than $25,000
c. An amount equal to or greater than $25,000 but less than $36,000
d. An amount equal to or greater than $36,000 but less than $49,000
e. An amount equal to or greater than $49,000 but less than $62,000
The explanation of the answer is now provided as follows:
The price of the trailer can be calculated using the following formula:
Price of the trailer = (Special payment in 5 years / (1 + r)^n) + (Annual regular payment forever / r) .................... (1)
Where:
Special payment in 5 years = $8,700
r = Interest rate = 14.3% or 0.143
n = number of years = 5
Annual regular payment forever = $4,100
Substituting the values into equation (1), we have:
Price of the trailer = ($8,700 / (1 + 0.143)^5) + ($4,100 / 0.143)
Price of the trailer = ($8,700 / 1.95088267511394) + $28,671.33
Price of the trailer = $4,459.52 + $28,671.33
Price of the trailer = $33,130.85
Since the calculated price of the trailer is $33,130.85, the correct option is c. An amount equal to or greater than $25,000 but less than $36,000.
