CBmE+195+-+Chemical+Engineering+Economics+-+Problem+Set+_1+-+Fall+2010

CBmE+195+-+Chemical+Engineering+Economics+-+Problem+Set+_1+-+Fall+2010

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University of California at Berkeley Department of Chemical and Biomolecular Engineering Chemical and Biomolecular Engineering 195 Special Topics – Chemical Engineering Economics Fall 2010 PROBLEM SET #1 – Due September 9, 2010 at the start of class Unless specified otherwise, all interest rates in this course are compound interest rates. 1. How many years, roughly, will it take for your money to double at an annual interest rate of a) 2% b) 6% c) 9% d) 15%? e) What is the product of the interest rate in percent and the time required to double your money in years? f) The answer to part e) is known as the “Rule of 72”. Derive the “Rule of 72” algebraically by expanding ln(1 + i) in a power series and making whatever other assumptions that you deem necessary. 2. Suppose that your company wants to sell bonds in order to finance an expansion, and that investors would like to earn an effective annual rate of 10 percent on these bonds. On January 1, 2010 what is the highest price that investors would be
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CBmE+195+-+Chemical+Engineering+Economics+-+Problem+Set+_1+-+Fall+2010

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