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Unformatted text preview: Homework 9 Solution 3.29 A person with a degree in engineering can expect to make: $5296 – $3443 = $1853 per month more than a person with a liberal arts degree. To calculate the future value of these monthly cash flows using (F|A,i%,n) we need a corresponding monthly interest rate. The nominal interest rate is 6% per year and interest compounds monthly so the effective monthly interest rate is: r 6% year i 0.5% month m 12 months year This is a case where PP = CP (i.e., both the cash flows and the compounding are monthly events). The future value of 40 × 12 = 480 monthly cash flows is n 4 8 1 i 1 1.005 1 F A $1853 $1853 1991.491 $3,690,232 i . 5 3.34 The company provides quarterly invoices of $140,000(1.2) = $168,000 for 3 years (12 quarters). To calculate the present worth of these quarterly cash flows using (P|A,i%,n) we need a corresponding quarterly interest rate. If the interest rate per compounding period is 1% per month, then the effective quarterly interest rate....
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- Fall '08
- Time Value Of Money, Geometric Gradient Series