Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / The table below shows the tons of steel and concrete that can be produced by the United States and France in an hour
Practice Problems: 1.) Determine the effective annual rate of interest corresponding to 18% compounded quarterly? 2.) A car was bought on the instalment basis with monthly instalment of P10,000 for 5 years. If interest rate is 12% compounded annually, calculate the cash price of the car. 3.) How many yearly withdrawals of P10,000 can be made from P14400 investment at 25% compounded annually? 4.) The purchase amount of an equipment amounting to P100,000 has been made available through a loan which earns 12% per annum. It has been agreed that the loan be payable in 10 equal payments. How much then is the yearly due?
Answer: A
Absolute advantage is the higher production in comparison.
As per the data given, the country-F has absolute advantage in both steel and concrete, because the steel production of F is 100 units and it is higher than 25 units of the US, and the concrete production of F is 200 units and it is higher than 100 units of the US.
Comparative advantage is the lower opportunity cost of production.
In case of steel production the country-F has lower OC than the US, since 2 < 4
In case of concrete production the US has lower OC than the US, since 0.25 < 0.50
Therefore, country-F has comparative advantage in steel and the US has comparative advantage in concrete.
Therefore, option-A is correct.
Other options are not correct:
Option B: the US doesn’t have any absolute advantage.
Option C: country-F has comparative advantage in steel only, but not in concrete.
Option D: the comparative advantage in concrete goes to the US, but not to the country-F.
1)
The effective annual rate of interest is calculated as follows
Effective annual rate of interest = 19.25 %
---------------------------------------------------------------------------------------------------------------
2)
The monthly installment on the loan and cash price of the car are related according to the following equation
Price of the car = $449,550.38
----------------------------------------------------------------------------------------------------
3)
The present value of the investment and the annual withdrawals are related as follows
![[(1 + 0.25) – 1] P14400 = P10,000 x 0.25 x (1 + 0.25) 72](https://media.cheggcdn.com/coop/00a/00a146cf-52e1-42b1-a652-a3749f1710c2/1600163320948_image.png)
Solving for n in the above equation
Number of yearly withdrawals they can make is 2 years
--------------------------------------------------------------------------------------------------------
4)
The yearly due is found using the following equation
Yearly due = $17,698.42
