ENGINEERING ECONOMY DIGITAL ACCESS
ENGINEERING ECONOMY DIGITAL ACCESS
8th Edition
ISBN: 2810022611683
Author: Blank
Publisher: MCG
Question
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Chapter 2, Problem 1P
To determine

Calculate the interest factor.

Expert Solution & Answer
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Explanation of Solution

Option (1):

The interest rate (i) is 10% and time period is 7 years.

The future to present compound interest factor (If) can be calculated as follows:

If=(1+i)n=(1+0.1)7=1.9487

The future to present compound interest factor is 1.9487.

Option (2):

The interest rate (i) is 12% and time period is 10 years.

The equivalent annual to present interest factor (EA) can be calculated as follows:

EA=i(1+i)n(1+i)n1=0.12(1+0.12)10(1+0.12)101=0.12(3.1058)3.10581=0.37272.1058=0.17699

The equivalent annual to present interest factor is 0.17699.

Option (3):

The interest rate (i) is 15% and time period is 20 years.

The present growth interest factor (Pg) can be calculated as follows:

Pg=1i((1+i)n1i(1+i)nn(1+i)n)=10.15((1+0.15)2010.15(1+0.15)2020(1+0.15)20)=6.6667(16.3665410.15(16.36654)2016.36654)=6.6667(15.366542.454982016.36654)=6.6667(6.25931.222)=6.6667(5.0373)=33.5822

The present growth interest factor is 33.5822.

Option (4):

The interest rate (i) is 2% and time period is 50 years.

The future to annual interest factor (Fa) can be calculated as follows:

Fa=(1+i)n1i=(1+0.02)5010.02=2.691610.02=84.58

The future to annual interest factor is 84.58.

Option (5):

The interest rate (i) is 35% and time period is 15 years.

The annual growth interest factor (Ag) can be calculated as follows:

Fa=1in(1+i)n1=10.3515(1+0.35)151=2.85711590.15851=2.85710.1682=2.6889

The annual growth interest factor is 2.6889.

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ENGINEERING ECONOMY DIGITAL ACCESS

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