Economy engineering
jiang
HW-3-102017.docx
HW-2- Chapter 2- Gradient Series and Effective interest rates.
1. Given the cash flows below, drawing the cash flow diagram, determine the future worth @ an interest rate of 8% compounded annually.Answer: FW = $28,869.76
|
Year |
1 |
2 |
3 |
4 |
|
Cash Flow in $ |
-5K |
-6K |
-7K |
-8K |
2. Determine the PW of the cash flows given in table below for an interest rate of 18%.
Show the cash flow diagram. Answer: PW = $172.48
|
Year |
0 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
|
Cash Flow in $ |
100 |
80 |
60 |
40 |
20 |
0 |
-20 |
-40 |
-60 |
-80 |
-100 |
3. Acument Global Technologies is exploring investment opportunities for $10 M. The company would like to maximize the return on this investment. Four investment opportunities being explored are for a period of 10 years. Help the company choose the best investment opportunity.
a. 10% compounded quarterly. F= $26,850,000
b. 9.85% compounded daily. F= $26,774,561
c. 9.95% compounded monthly. F=$26,936,511
4. A loan of 10,000 is to be repaid a nominal interest rate of 12% year.
Determine,
a. the effective interest rate if loan is paid back every six months. 12.36%
b. the effective interest rate if loan is paid back every three months.12.55%
c. the effective interest rate if loan is paid backevery month.12.68%
d. the effective interest rate if loan is paid back biweekly 12.72%
e. the. effective interest rate if loan is paid back every week.12.73%
