Suppose You Own a Courier Service and You Use Two

question 45

Multiple Choice

Suppose you own a courier service and you use two types of delivery vehicles - Model A,which costs $30 000 to purchase,and Model B,which costs $50 000 to purchase.You have a budget of $300 000 for the purchase of new vehicles.What is the opportunity cost of one Model A vehicle?

• A)0
• B)3/5 ths of a Model B vehicle
• C)5/3rds of Model B vehicle
• D)5 Model B vehicles
• E)3 Model B vehicles

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Definitions:

Loan Payment Schedule

A detailed plan indicating the amounts due and payment dates over the life of a loan.

Effective Rate

The actual interest rate an investment earns or a loan accrues due to compounding over a specified period.

Amortized

Refers to the gradual reduction of a debt over time by paying regular installments that cover both interest and principal.

Amortization Schedule

a table detailing each periodic payment on an amortizing loan, showing the amount of principal and the amount of interest that comprise each payment so that the loan will be paid off by the end of its term.