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Unformatted text preview: cost of a red tape cutting machine is $10,000 (NOTE: the cost of red tape cutting machines increase at the same rate as the general inflation rate). (Please use back of this page for work) Chapter 14, POP Quiz Solution ISE 311 – Lavelle (#1) Number of years between 1970 and 2007 = 37 Present Value = 0.06; Future Value = 0.41 .41 = .06(1+f)^37 (1 + f )^37= .41/.06 f=0.0533 or 5.33% The answer is “B” (#2) Using the approximation i(market) = inflation rate + real rate 16=10+i(real)l thus i(real)=6% (#3) R$ = A$(P/F,i%,n); this strips out inflation for n periods Since multiplying by (P/F,i%,n) = dividing by (1+f)^n The answer is “B” (#4) Deposit =? f = 10% i = 8% n = 10 Years Initial cost = $10,000 Future price = P (F/P, f, n) = 1 , ( F / P , 1 % , 1 ) = 10,000(2.5940) = $25,940 Present worth = Future price (P/F, i, n) = 25,940(P/F, 8%, 10) = 25,940(0.4632) =$12,015.41...
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This note was uploaded on 12/08/2010 for the course ISE 311 taught by Professor Bernhard during the Spring '10 term at N.C. State.
 Spring '10
 Bernhard

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