Question

Present value with periodic rates.   Sam​ Hinds, a local​ dentist, is going to remodel the dental reception area and add two new workstations. He has contacted​ A-Dec, and the new equipment and cabinetry will cost ​$15 comma 000 . The purchase will be financed with an interest rate of 8.5 ​% loan over 9 years. What will Sam have to pay for this equipment if the loan calls for semiannual payments ​(2 per​ year) and weekly payments ​(52 per​ year)? Compare the annual cash outflows of the two payments. Why does the weekly payment plan have less total cash outflow each​ year? What will Sam have to pay for this equipment if the loan calls for semiannual payments ​(2 per​ year)? ​$nothing ​ (Round to the nearest​ cent.)

Answer 1

Answer is given on sheets provided below.

for a short summary we can say:

for semi annually payments sam have to pa 2418 per year

for weekly payments he has to pay 2392 per year

and difference is due to the principal amount paid early (i.e. on weekly basis) in option 2