EconTestF03 - EEL 4914 Exam on Economics Dr Fernando...

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EEL 4914 Exam on Economics Dr. Fernando Gonzalez Fall 2003 NAME group# For each question you must provide a solution that has the following form: A A A A A A A F 92 . 196 , 4 $ 06 . 0 1 ) 06 . 0 1 ( 500 $ 7 = + = F You must show the graph and the equations. 1. You owe your friend $100. However your friend says that you can pay him in 5 years if you pay him $130. If you want to pay him in 3 years how much should you pay him so that the rate at which he lends you money is the same? Hint assume yearly compounding.
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2. You estimate the monthly cost of maintaining a machine for 5 years is $10 for the first month and increases by $0.10 each month thereafter. You must report the maintenance cost to your boss but he wants it in terms of a fixed yearly cost for the 5 years. Compute the equivalent fixed yearly cost for the 5 years. Use an
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