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)

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

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Q3
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6% n 1 2 3 4 5 6 7 8 9 10 Single Payments Compound Present Amount Worth P/F F/P 1.0600 1.1236 1.1910 1.2625 1.3382 TABLE 11 Discrete Cash Flow: Compound Interest Factors Uniform Series Payments Compound Amount F/A Capital Recovery A/P 1.4185 1.5036 1.5938 1.6895 1.7908 0.9434 0.8900 0.8396 0.7921 0.7473 0.7050 0.6651 0.6274 0.5919 0.5584 Sinking Fund A/F 1.00000 0.48544 0.31411 0.22859 0.17740 0.14336 0.11914 0.10104 0.08702 0.07587 1.0000 2.0600 3.1836 4.3746 5.6371 6.9753 8.3938 9.8975 11.4913 13.1808 1.06000 0.54544 0.37411 0.28859 0.23740 0.20336 0.17914 0.16104 0.14702 0.13587 Present Worth P/A 0.9434 1.8334 2.6730 3.4651 4.2124 4.9173 5.5824 6.2098 6.8017 7.3601 Arithmetic Gradients Gradient Present Worth P/G 0.8900 2.5692 4.9455 7.9345 11.4594 15.4497 19.8416 24.5768 29.6023 Gradient Uniform Series A/G 0.4854 0.9612 1.4272 1.8836 2.3304 2.7676 3.1952 6% 3.6133 4.0220 A family that won a $100,000 prize on America's Funniest Home Videos decided to put one-half of the money in a…
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