ISYE 3025 Exam 1A_Key

# ISYE 3025 Exam 1A_Key - 1. [10] Suppose you would like to...

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1. [10] Suppose you would like to accumulate \$1,000,000 by the time you retire in 40 years. Assuming that you are earning 10% on your investments (for the 40 years), how much should you invest every month in order to realize your goal. Investment per year=1,000,000 (A/F,10%.40)=2259.4 Investment per month=2259.4/12=188.28 2. [10] Consider the sequence of cash flows given in the table. Convert the sequence to an equivalent uniform sequence over N = 7 periods. The interest rate is i = 10% per period. End of period 1 2 3 4 5 6 7 Cash flow \$300 340 380 420 460 500 540 We decompose the cash flow into 2 cash flows:{300,300,300,…} and {0,40,80,120,…} Annual equivalent of the first cash flow A 1 =300. Annual equivalent of the second cash flow A 2 =40(A/G,10%,7)=104.864. Annual equivalent of the original cash flow=A 1 +A 2 =404.864. 3. [10] You just inherited some money and you wish to save some of it: you will make a deposit of \$20,000 into an account that earns 5% annual compound interest. You do not plan to make any intermediate withdrawals from the account. How long will it take (how many

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## This note was uploaded on 09/07/2009 for the course ISYE 3025 taught by Professor Lee during the Spring '09 term at Georgia Institute of Technology.

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ISYE 3025 Exam 1A_Key - 1. [10] Suppose you would like to...

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