An engineering freshman wants to purchase a PC to use during the five years that
ID: 2808514 • Letter: A
Question
An engineering freshman wants to purchase a PC to use during the five years that she plans to study civil engineering at ISU. After looking around a bit, she finds that a wellequipped PC with software can be purchased for $1,250. The PC should have a market value of at least $200 if she sells it when she graduates after five years (assuming she graduates in 60 months). Assume that no maintenance will be required. Use an interest rate of 6% compounded monthly. Determine the monthly cost of owning the computer.
Explanation / Answer
Present valuye of PC=1250
P*((1-(1+(6%/12))^(-60))/(6%/12))+200/(1+(6%/12))^60=1250
P*((1-(1+(6%/12))^(-60))/(6%/12))=1250-(200/(1+(6%/12))^60)
P=(1250-(200/(1+(6%/12))^60))/((1-(1+(6%/12))^(-60))/(6%/12))
=21.30 should be monthly cost
the above is answer..