1) A deposit of $10,000 today at an interest rate of 6%/ yr. compounded yearly w
ID: 2613279 • Letter: 1
Question
1) A deposit of $10,000 today at an interest rate of 6%/ yr. compounded yearly will have a future value in 20 years closest to:
a. $31,180 b. $32,070 c. $36,786 d. $39,993
2) If a construction company needs $20,000 to replace a crane in 10 years, the amount in must invest today at a RoR of 12% per year is closest to:
a. $6,440 b. $6,756 c. $7,190 d. $8,103
3) An engineering firm borrows $10,000 now, and must repay the loan with equal monthly payments over a 5-year period. At a nominal interest rate of 6% per year compounded monthly, The monthly payment will closest to:
a. $143 b. $193 c. $198 d. $619
PS: There are Engineering Economics questions. I know how to do it. I just want to make sure I have the right answers. Thank you
Explanation / Answer
Answer:
1. Future value = PV (1+i)n = $10,000 * (1+0.06)20 = $32,071.35 (Option-b)
2. PV = Future value/(1+i)n = $20,000/(1+0.12)10 = $6,439.46 (option - a)
3. Annuity payment = Loan amount * {(1+i/n)n*no of years * i/n}/ {(1+i/n)n*no of years - 1}
Where, i = rate if interest, n = No of periods per annum,
So Monthly payment = $10,000* {(1+0.06/12)12*5 * 0.06/12}/{(1+0.06/12)12*5 - 1}
= $10,000 * (0.00674/0.34885) = $193.20 (option b)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.