Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Question
Chapter 4, Problem 88P
(a):
To determine
Calculate the yield.
(b):
To determine
Calculate the new yield.
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Draw the cash flow diagram for each of the following situations. (a) Today, you invest P100,000 into a fund that pays 28% interest compounded annually. Three years later, take a P50,000 loan from a bank at 20% annual interest and invest it in the fund. Two years later, you withdraw enough money from the fund to repay your loan from the bank and all interest due on it. Three years from this withdrawal you start taking P20,000 per year out of the fund. (b) A person deposits P10,000 each year for 9 years. He then withdraws annually from the bank P5,000 for 8 years starting 1 year after the 9th deposit is made. (c). An engineer wishes to set up a special fund by making uniform semiannual end-of-period deposits for 20 years. The fund is to provide P25,000 at the end of each of the last five years of the 20-year period. The interest is 8% compounded semiannually.
Which of the following statements is CORRECT?
The present value of a 3-year, $150 ordinary annuity will exceed the present value of a 3-year, $150 annuity due.
If a loan has a nominal annual rate of 8%, then the effective rate will never be less than 8%.
If a loan or investment has annual payments, then the effective, periodic, and nominal rates of interest will all be different.
The proportion of the payment that goes toward interest on a fully amortized loan increases over time.
An investment that has a nominal rate of 6% with semiannual payments will have an effective rate that is smaller than 6%.
Directions: Looking at the chart below, calculate the monthly interest rate and monthly interest
owed on a $5,000 loan for each of the options below.
Monthly Interest
(loan amount *
monthly rate)
Amount
Financial
Monthly Rate
(APR/12)
Borrowed
APR/APY
Institution
$1,000
$1,000
$1,000
$1,000
$1,000
Bank Loan
5%
Credit Union Loan
3%
Credit Card
11%
Pay Day Loan
18%
Title Pawn Loan
21%
Part III: Simple v Compound Interest
Directions: Use the given scenario to complete the questions.
Simple Interest Scenarios:
1. Abigail is saving $1,000 at 4% interest for 3 years, calculated as simple interest. At the end
of the three years, how much interest will she have earned?
2. Elijah is borrowing $10,000 at 3.5% interest for 10 years, calculated as simple interest. At
the end of the ten years, how much will he owe?
3. Adeline is saving $5,000 at 2.05% interest for 5 years, calculated as simple interest. At the
end of the five years, how much will she have in total?
4. Santiago is borrowing $9,000…
Chapter 4 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7PCh. 4 - Prob. 8PCh. 4 - Prob. 9PCh. 4 - Prob. 10P
Ch. 4 - Prob. 11PCh. 4 - Prob. 12PCh. 4 - Prob. 13PCh. 4 - Prob. 14PCh. 4 - Prob. 15PCh. 4 - Prob. 16PCh. 4 - Prob. 17PCh. 4 - Prob. 18PCh. 4 - Prob. 19PCh. 4 - Prob. 20PCh. 4 - Prob. 21PCh. 4 - Prob. 22PCh. 4 - Prob. 23PCh. 4 - Prob. 24PCh. 4 - Prob. 25PCh. 4 - Prob. 26PCh. 4 - Prob. 27PCh. 4 - Prob. 28PCh. 4 - Prob. 29PCh. 4 - Prob. 30PCh. 4 - Prob. 31PCh. 4 - Prob. 32PCh. 4 - Prob. 33PCh. 4 - Prob. 34PCh. 4 - Prob. 35PCh. 4 - Prob. 36PCh. 4 - Prob. 37PCh. 4 - Prob. 38PCh. 4 - Prob. 39PCh. 4 - Prob. 40PCh. 4 - Prob. 41PCh. 4 - Prob. 42PCh. 4 - Prob. 43PCh. 4 - Prob. 44PCh. 4 - Prob. 45PCh. 4 - Prob. 46PCh. 4 - Prob. 47PCh. 4 - Prob. 48PCh. 4 - Prob. 49PCh. 4 - Prob. 50PCh. 4 - Prob. 51PCh. 4 - Prob. 52PCh. 4 - Prob. 53PCh. 4 - Prob. 54PCh. 4 - Prob. 55PCh. 4 - Prob. 56PCh. 4 - Prob. 57PCh. 4 - Prob. 58PCh. 4 - Prob. 59PCh. 4 - Prob. 60PCh. 4 - Prob. 61PCh. 4 - Prob. 62PCh. 4 - Prob. 63PCh. 4 - Prob. 64PCh. 4 - Prob. 65PCh. 4 - Prob. 66PCh. 4 - Prob. 67PCh. 4 - Prob. 68PCh. 4 - Prob. 69PCh. 4 - To buy a 150,000 house, you take out a 9% (APR)...Ch. 4 - Prob. 71PCh. 4 - Prob. 72PCh. 4 - Prob. 73PCh. 4 - Prob. 74PCh. 4 - Prob. 75PCh. 4 - Prob. 76PCh. 4 - Prob. 77PCh. 4 - Prob. 78PCh. 4 - Prob. 79PCh. 4 - Prob. 80PCh. 4 - Prob. 81PCh. 4 - Prob. 82PCh. 4 - Prob. 83PCh. 4 - Prob. 84PCh. 4 - Prob. 85PCh. 4 - Prob. 86PCh. 4 - Prob. 87PCh. 4 - Prob. 88PCh. 4 - Prob. 89PCh. 4 - Prob. 90PCh. 4 - Prob. 91PCh. 4 - Prob. 92PCh. 4 - Prob. 93PCh. 4 - Prob. 1STCh. 4 - Prob. 2STCh. 4 - Prob. 3STCh. 4 - Prob. 4STCh. 4 - Prob. 5ST
Knowledge Booster
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