2. An investor has a principal amount of $P. If he desires a payout (return) of 0.1P each year, how many years will it take to deplete an account that earns 8% Interest Rate per Year 4% 6% 8% 10% Payout per Year 10% (% of principal) 20% 30% 20.9 per year? 0.1P = P(A/P, 8%, N), so N ~= 21 years. A payout duration table can be constructed for select payout percentages and compound interest rates. Complete the following table. (Note: table entries are years.) Summarize your conclusions about the pattern observed in the table. (5.5)

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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2. An investor has a principal amount of $P. If he
Interest Rate per Year
desires a payout (return) of 0.1P each year, how many
years will it take to deplete an account that earns 8%
4% 6%
8%
10%
Payout per Year 10%
(% of principal) 20%
30%
20.9
per year?
0.1P = P(A/P, 8%, N), so N ~= 21 years.
A payout duration table can be constructed for select
payout percentages and compound interest rates.
Complete the following table. (Note: table entries are
years.) Summarize your conclusions about the pattern
observed in the table. (5.5)
Transcribed Image Text:2. An investor has a principal amount of $P. If he Interest Rate per Year desires a payout (return) of 0.1P each year, how many years will it take to deplete an account that earns 8% 4% 6% 8% 10% Payout per Year 10% (% of principal) 20% 30% 20.9 per year? 0.1P = P(A/P, 8%, N), so N ~= 21 years. A payout duration table can be constructed for select payout percentages and compound interest rates. Complete the following table. (Note: table entries are years.) Summarize your conclusions about the pattern observed in the table. (5.5)
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