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ECN801, V. Bardis
Problem Set 4
1. (4.06) For an interest rate of 12% per year compounded every 2 months, determine the nominal interest rate
per (a) 4 months, (b) 6 months, and (c) 2 years.
2. (4.10) An interest rate of 16% per year, compounded quarterly, is equivalent to what effective interest rate
per year?
3. (4.23) A present sum of $5000 at an interest rate of 8% per year, compounded semiannually, is
equivalent to how much money 8 years ago?
4. (4.25) Radio Frequency Identification (RFID) is technology that is used by drivers with speed passes at toll
booths and ranchers who track livestock from farm to fork. WalMart expects to begin using the technology to
track products within its stores. If RFIDtagged products will result in better inventory control that will save
the company $1.3 million per month beginning 3 months from now, how much could the company afford to
spend now to implement the technology at an interest rate of 12% per year, compounded monthly, if it wants
to recover its investment in 2½ years?
5. (4.30) Thermal Systems, a company that specializes in odor control, made deposits of $10,000 now,
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This note was uploaded on 09/24/2011 for the course CPS 125 taught by Professor Panzer during the Winter '11 term at Ryerson.
 Winter '11
 Panzer

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