**Problem 1: Effective Interest Rate Calculation**Calculate the effective interest rate per 6 months given a nominal interest rate of 12% per year, compounded quarterly (every 3 months).**Problem 2: Present Worth Calculation**Determine the equivalent present worth (at time t = 0) of a uniform series of payments of $7000. The payments occur annually over 7 years, with the first payment starting 6 years from now. Assume a continuous compounding interest rate of 10% per year.

here we calculate the present worth and effective interest rate by using the given details , so…

What is the effective interest rate per 6 months for a nominal interest rate of 12% per year compounded every 3 months? Find the equivalent of present worth (t = 0) of a uniform series of $7000 for 7 years, if the payment is made every 12 months, starting 6 years from now. Assume the interest rate is 10% per year, compound continuously.

What is the effective interest rate per 6 months for a nominal interest rate of 12% per year compounded every 3 months? Find the equivalent of present worth (t = 0) of a uniform series of $7000 for 7 years, if the payment is made every 12 months, starting 6 years from now. Assume the interest rate is 10% per year, compound continuously.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Cash Flow in Engineering Economics (Interest and Equivalence)

The cash flows of a firm are of two categories such as cash inflows and cash outflows. Cash inflow is the money or income entering a firm during a specific period whereas cash outflow is the money exiting a firm during a specific period in the form of the expenses incurred by the firm. In other words, we can say that cash flow is a series of expenses and credits that run over the project over the lifetime it existed whereas cash inflows are all the income and gains the company earns as a result of its operations.

Question

**Problem 1: Effective Interest Rate Calculation**

Calculate the effective interest rate per 6 months given a nominal interest rate of 12% per year, compounded quarterly (every 3 months).

**Problem 2: Present Worth Calculation**

Determine the equivalent present worth (at time t = 0) of a uniform series of payments of $7000. The payments occur annually over 7 years, with the first payment starting 6 years from now. Assume a continuous compounding interest rate of 10% per year.

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