Engineering Economic Analysis
Engineering Economic Analysis
13th Edition
ISBN: 9780190296902
Author: Donald G. Newnan, Ted G. Eschenbach, Jerome P. Lavelle
Publisher: Oxford University Press
Question
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Chapter 3, Problem 24P
To determine

(a)

The matured amount after 10 years using formula.

Expert Solution
Check Mark

Answer to Problem 24P

The matured amount after 10 years using formula is $7012.04.

Explanation of Solution

Given:

Interest rate is 2.4%.

Time period is 10 years.

Calculation:

Write the expression to calculate the future value.

F=P(1+i)n ...... (I)

Here the present amount is, P, the future amount is F, the rate of interest is i and the time period is n.

Substitute 0.024 for i, 10 for n and $5530 for P in Equation (I).

F=$5530(1+0.024)10=$5530(1.268)=$7012.04 ...... (II).

Conclusion:

Therefore, the matured amount after 10 years using formula is $7012.04.

To determine

(b)

The matured amount after 10 years using interest table and interpolation.

Expert Solution
Check Mark

Answer to Problem 24P

The matured amount after years using interest table and interpolation is $7017.57.

Explanation of Solution

Given:

Interest rate is 2.4%.

Time period is 10 years.

Calculation:

Draw the table to calculate the future value at 2% and 3%.

Year P Compound interest factor at 2% Compound interest factor at 3% Future amount at 2% d=(a0×b) Future amount at 3% e=(a0×c)
0 $5530
10 1.219 1.344 $6741.07 $7432.32

Here, factors are calculated by using Equation shown below.

Factor=(1+i)n.

Find the future value at 2.4% using interpolation.

x2x1y2y1=xx1yy1 ........ (III)

Here, the higher value of future amount is x2, and the lower value of future amount is x1, the future value to be calculated is x, the higher interest rate is y2, the lower interest rate is y1 and the interest rate at which interpolation is to be done is y.

Substitute $7432.32 for x2, $6741.07 for x1, 3% for y2, and 2% for y1, and 2.4% for

y in Equation (III).

$7432.32$6741.070.030.02=x$6741.070.0240.02$691.250.01=x$6741.070.004x=$7017.57.

Conclusion:

Therefore, the matured amount after 10 years using interest table and interpolation is $7017.57.

To determine

(c)

The matured amount after 10 years using spreadsheet.

Expert Solution
Check Mark

Answer to Problem 24P

The matured amount after 10 years using spreadsheet is $7010.11.

Explanation of Solution

Given:

Interest rate is 2.4%.

Time period is 10 years.

Calculation:

The spreadsheet for a 5 button solution is shown below.

Engineering Economic Analysis, Chapter 3, Problem 24P

Conclusion:

Therefore, the matured amount after 10 years using spreadsheet is $7010.11.

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