CHE 4253  Midterm Exam
Instructor: Dimitrios V. Papavassiliou
November 11, 2004.
Name:……………………….
OU ID:………………………
Answer all questions and show your calculations, if any are necessary.
1.
(20 points) What would be the optimum production rate, Q, for a process that has a product
cost C of the form C = C
F
+
b
*Q
2
and revenues of the form S=
a
*Q?
Is there any condition for b and/or
a
that needs to be satisfied at the optimum rate?
2.
(15 points) An annuity is used to accumulate money at certain periods.
Interest is
compounded at an effective annual rate of 5%.
What is the sum of the annuity at the end of
the second, and third year if $10,000 is deposited at the beginning of each year?
CHE 4253 Midterm, Page 1 of
3
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(10 points) We have an investment over a period of three years, and the interest rate changes
each year, say i
1
=4%, i
2
=8% and i
3
=10%. Assuming discrete compounding, what is the value of
the effective interest rate for this investment?
4.
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 Spring '09
 Lobban
 Time Value Of Money, Net Present Value, ........., Internal rate of return

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