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The CRF (ep) is also known as: [CRF(EP) - 8% - 7], where
Answer & Solution
Correct Answer:
Option
C
CRF(ep) stands for Capital Recovery Factor (equal payment).
CRF(EP) - 8% - 7 means that we are trying to find a factor to convert a present value into a series of equal payments.
8% is the interest rate used for the calculation. So, Option A is correct.
7 is the number of years (or periods) over which the payments will be made. So, Option B is also correct.
Since both Option A and Option B are correct, the answer is Both (A) and (B).
CRF(EP) - 8% - 7 means that we are trying to find a factor to convert a present value into a series of equal payments.
8% is the interest rate used for the calculation. So, Option A is correct.
7 is the number of years (or periods) over which the payments will be made. So, Option B is also correct.
Since both Option A and Option B are correct, the answer is Both (A) and (B).
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LoginThis notation refers to the Capital Recovery Factor (Equal Payments), also called the Sinking Fund Factor reciprocal, used in engineering economics.
By definition: CRF(i,n) = i(1+i)^n / (1+i)^n - 1
The first number, 8%, is the interest rate per year i=0.08.
The second number, 7, is the number of years (periods) n=7.
So the notation CRF(EP) – 8% – 7 indeed means:
8% = annual interest rate
7 = number of years
Correct answer: C. Both (A) and (B)