(a) PMT = 3500.00; i = 2%, n = 30; c = 4/2 = 2 — the White Rock Fire Department invests now new ladder systems for several

If the White Rock Fire Department invests now in new ladder systems for several of its trucks, the department would save $3500 every 6 months in repair costs. What single cash investment made now is equivalent to the repair payments if interest is 8% compounded quarterly and the payments are made

(a) At the end of every 6 months for 15 years?

(b) At the beginning of every 6 months for 10 years?

(c) At the end of every 6 months for 8 years but deferred for 4 years?

(d) At the beginning of every 6 months for 9 years but deferred for 3 years?

(e) At the end of every 6 months in perpetuity?

(f) At the beginning of every 6 months in perpetuity?

SOLUTION

(a) PMT = 3500.00; i = 2%, n = 30; c = 4/2 = 2

p = (1.02)2 – 1 = 1.0404 – 1 = 4.04%

= 3500 (17.20836) = $60 229.26