IET3424_Homework#2_Chapter 4 and 5_Problems_Spring 2019.doc

# IET3424_Homework#2_Chapter 4 and 5_Problems_Spring 2019.doc...

• Homework Help
• 2
• 100% (3) 3 out of 3 people found this document helpful

This preview shows 1 out of 2 pages.

Homework #2 Chapter 4 Nominal and Effective Interest Rates Chapter 5 Present Worth Analysis Instructions: Solve the following problems (3 problems) . Remember to show all your assumptions and calculations . You will not receive any credit for submitting only the answers. You can submit your homework in the Word file provided or Excel file. Submit your file with your complete homework to the dropbox created for this assignment. **If handwriting, student's handwriting must be legible** Due Date: 2/21/2019 by 11:59 p.m. ET 1) What is the future worth 4 years from now of a present cost of \$150,000 to Hydron, Inc., at an interest rate of 24% per year compounded monthly? (25 points) (Source: Blank and Tarquin, 2 nd edition) Solution: = 150,000 (1+0.24/12) 12*4 = 150,000 (1+0.02) 48 =150,000 * (1.02) 48 = \$388,060.5578 2) What effective interest rate per year, compounded continuously, is equivalent to a nominal rate of 7% per year? Solve by formula. (25 points) Solution: Effective interest rate = 1 - e rt = 1 - e 0.07 * 1 = 1 - e 0.07 = 1 - 1.0725 = 0.0725 or 7.25% So that makes the effective interest rate is 7.25%.

Subscribe to view the full document.

You've reached the end of this preview.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern