Engineering Economy

ENGR 3970/ET 5970 Homework Assignment #2 – Spring 2019 Note: Show all of your work to arrive at a final result. 1) Using the amounts in the table below and an interest rate of 8% compounded annually, determine

(a) the equivalent present amount (b) the equivalent annual amount Use the gradient conversion factor, if and where applicable, for full credit.

EOY Deposit

0 1000

1 1000

2 1000

3 1000

4 200

5 250

6 300

7 350

8 400

9 500

10 400

11 300

12 200

2) Using the amounts in the table below and an interest rate of 10% compounded annually, determine:

 the equivalent present amount Use the gradient conversion factor, if and where applicable, for full credit.

EOY Deposit

0 100

1 0

2 0

3 200

4 500

5 500

6 500

7 500

8 650

9 550

10 450

11 350

3) A person deposits $5000 into an account. How much will be in the account after 6 years, assuming:

(a) 12% compounded quarterly. Show the units for the interest rate. (b) 10% compounded continuously. Show the units for the interest rate.

4) A $2000 bond that pays 10% compounded quarterly and matures in 5 years is for sale. What is the maximum that should be paid for the bond if 12% compounded quarterly is required on the bond?