Question 1.7 Consider the cash flow series given in the following diagram. What value of C makes the deposit series equivalent to the withdrawal series at an interest rate of 7% compounded annually? 0 $1,500 1 $1,150 N $800 3 $450 A) $547.69 B) $565.13 C) $583.27 D) Answers A, B and C are not correct 4 5 2C 6 3C 7 4C 8

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Question 1.7
Consider the cash flow series given in the following diagram. What value
of C makes the deposit series equivalent to the withdrawal series at an interest rate of 7%
compounded annually?
C
3
4
5
$450
[III]
0
$1,500
$1,150
1
0
A) $547.69
B) $565.13
C) $583.27
D) Answers A, B and C are not correct.
2
1
$800
1750
2C
6
A) $3,956.02
B) $4,114.87
C) $4,341.53
D) Answers A, B and C are not correct
Question 1.8
You will do 5 annual deposits according to the following schedule. At the
end of the first year you will deposit $1,750 and subsequent deposits increase at a rate of 5% per
year. Last deposit is at the end of year 5. Then, starting at the end of the sixth year, you do 4
equal annual withdrawals. If the interest rate is 12% compounded annually, what is the amount
of each withdrawal assuming that your bank balance will be zero at the end of ninth year?
3C
2
3
4
5
6
7
ஆன்
1750(1 + 0.05)¹
1750(1 + 0.05)²
1750 (1 + 0.05)³
1750(1 + 0.05)4
7
%12
4C
8
8
9
Transcribed Image Text:Question 1.7 Consider the cash flow series given in the following diagram. What value of C makes the deposit series equivalent to the withdrawal series at an interest rate of 7% compounded annually? C 3 4 5 $450 [III] 0 $1,500 $1,150 1 0 A) $547.69 B) $565.13 C) $583.27 D) Answers A, B and C are not correct. 2 1 $800 1750 2C 6 A) $3,956.02 B) $4,114.87 C) $4,341.53 D) Answers A, B and C are not correct Question 1.8 You will do 5 annual deposits according to the following schedule. At the end of the first year you will deposit $1,750 and subsequent deposits increase at a rate of 5% per year. Last deposit is at the end of year 5. Then, starting at the end of the sixth year, you do 4 equal annual withdrawals. If the interest rate is 12% compounded annually, what is the amount of each withdrawal assuming that your bank balance will be zero at the end of ninth year? 3C 2 3 4 5 6 7 ஆன் 1750(1 + 0.05)¹ 1750(1 + 0.05)² 1750 (1 + 0.05)³ 1750(1 + 0.05)4 7 %12 4C 8 8 9
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