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Sumicon Widgets LLC has a 7 year maintenance contract with Turnkey Inc. that costs $1,000...

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Accounting

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Sumicon Widgets LLC has a 7 year maintenance contract with Turnkey Inc. that costs $1,000 every 6 months for hardware maintenance. The maintenance contract funds are drawn from an overhead account that returns 6% per year compounded quarterly. The cash flow diagram is shown below. Answer the following questions about these maintenance contract payments. a) Which is longer, the payment period or the compounding period? ( 2 points) Use an inequality equation to state your answer. (3 points)) b) What is the effective interest rate per payment period? ( 2 points) Briefly explain your answer. ( 3 points) c) What is the total number of semi-annual payment periods, n ? ( 2 points) Briefly explain your answer. (3 points)

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