problemset004

# problemset004 - ECN801 V Bardis Problem Set 4 1(4.06 For an...

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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. Wal-Mart expects to begin using the technology to track products within its stores. If RFID-tagged 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?
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