HW-Chap-3-1 - principal. For compound interest, you earn...

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Engineering Economy GE 272 Chapter 3 3-2 Under most circumstances $20,000 received now would be more valuable. The present worth factors for n = 4, i.e. (P/A, i, 4), are all less than 4 for interest rates greater than 0. Receiving $5,000 per year for four years would only potentially be more valuable for certain conditions of deflation and/or transitioning into a lower incremental tax bracket. 3-3 For simple interest, the interest earned each year is a fixed amount based upon the original
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Unformatted text preview: principal. For compound interest, you earn interest on previous years interest as well as on the principal. Compound interest is more common. 3-8 P = $750, n = 3 years, i = 8%, F = ? F = P (1 + i) n = $750 (1.08)3 = $750 (1.260)= $945 Using interest tables: F = $750 (F/P, 8%, 3) = $750 (1.360) = $945 3-11 Use P = F (P/F, i, n) = F (1 + i)-n = 20,000 (1 + 0.07 )-n . (a) n = 5, P = $14,260 (b) n = 10, P = $10,167 (c) n = 20, P = $5,168 (d) n = 50, P = $679...
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