3. Using an interest rate of 8% per yearcompounded annually and two gradientsseries, convert the following cash flows toa. Present value amount (P) b. Annualequivalent amount (A) c. Future sum atthe end of the sequence (F) EOY0 1 2 3 4 5 6 7 8 9 10 Amount2000 1800 1600 1400 1200 1000 900 800*

The Interest rate is the proportion of a mortgage charged as interest to the borrower, normally…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

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Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

3. Using an interest rate of 8% per year
compounded annually and two gradients
series, convert the following cash flows to
a. Present value amount (P) b. Annual
equivalent amount (A) c. Future sum at
the end of the sequence (F) EOY
0 1 2 3 4 5 6 7 8 9 10 Amount
2000 1800 1600 1400 1200 1000 900 800*

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Step 1: Define Interest Rate

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Step 2: Explain the Present value amount

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Step 3: Explain the Annual equivalent amount

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Step 4: Explain the Future sum at the end of the sequence (F)

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