A property was purchased for $10,000.00 down and quarterly payments of $1,350 for 10 years. If the first payment was made on the date of the purchase and interest is 5.5 % compounded quarterly, a. what was the purchase price of the property? b. how much is the cost of financing? C. what is the effective rate of interest equivalent to a nominal rate of 5.5 % compounded quarterly?

Answer:cost of financing is $12108.62interest is 5.614 %Step-by-step explanation:given datapayment = $10000principal = $1350time t = 10 year = 10 × 4 = 40rate  r = 5.5 % = 5.4 /4 = 1.375 %to find outpurchase price and cost of financing and rate of interestsolutionwe know here purchase price is calculated aspurchase price = payment + present value    .................1present value = principal (1+r) ( 1- [tex](1+r)^{-t}[/tex] / r )put here value present value = 1350 (1+0.1375) ( 1- [tex](1+01375)^{-40}[/tex] / 0.01375 )present value = 41891.3833so from equation 1 purchase price = 10000 + 41891.3833purchase price = $51891.38andso amount of payment is hereamount of payment = 10000 + 40×1350amount of payment = $64000so here cost of financing is herecost of financing = 64000 - 51891.38 cost of financing = $12108.62andso here1 + interest = [tex](1+0.055/4)^{4}[/tex]1 + interest = [tex](1.01375)^{4}[/tex]interest = 0.0561448interest = 5.614 %