Chapter 3 - McGill Faculty of Engineering MIME 310...

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1 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials Chapter 3. Time Value of Money
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2 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials 3.1 Arnold S. deposited $1000 into a savings account that paid an annual interest rate of 5 percent compounded annually. Five years later, he withdrew half of the accumulated amount and subsequently made five annual deposits of $2000, with the first, one year after the withdrawal. He finally withdrew the accumulated amount 15 years after making the initial deposit. i) Future value at t=5 of $1000 deposited at t=0: F 5 = 1000 (F/P,5%,5) = 1000 (1.2763) = 1276.28 Withdrew half L $638.14 i) What amount did Arnold withdraw after five years? ii) What amount did Arnold withdraw after 15 years? $1000 $2000 0 5 10 15 ? ? 2nd CLR TVM, 5, N, 5, I/Y, 1000, PV; CPT FV & -1276.28
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3 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials ii) Future value at t=10 of remaining amount: F 10 = 638.14 (F/P,5%,5) = 638.14 (1.2763) = 814.46 Future value at t=10 of $2000 annuity: F 10 = 2000 (F/A,5%,5) = 2000 (5.5256) = 11 051.26 638.14, PV, 2000, PMT; CPT FV & -11 865.71 \ Total at t=10: 814.46 + 11 051.26 = 11 865.72 0 5 10 15 $638.14 ? $2000
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4 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials 0 5 10 15 ? $11 865.72 Future value at t=15 F 15 = 11 865.72 (F/P,5%,5) = 11 865.72 (1.2763) = 15 144.22 \ Amount withdrawn L $15 144.22 PV, 0, PMT; CPT FV 15 143.99
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5 McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials 3.2 Janet borrowed $2000 at an annual interest rate of 8 percent compounded monthly. She was to repay the loan in 12 monthly installments, with the first starting 3 months after the loan was contracted, and with each payment 10 percent greater than the previous amount. Determine the amount of Janet's 6th payment. Use the Geometric Gradient Series Factor
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This note was uploaded on 10/06/2009 for the course MIME 310 taught by Professor Bilido during the Summer '08 term at McGill.

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Chapter 3 - McGill Faculty of Engineering MIME 310...

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