Lec%209_Full(1)

# Lec%209_Full(1) - IE 343 Engineering Economics Lecture 9...

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IE 343 Engineering Economics Lecture 9: Chapter 4 – The Time Value of Money Instructor: Tian Ni Sep. 12, 2011 IE 343 Fall 2011 1

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• We will give back the graded Hws and Quizzes in class • Leftovers will be placed in a big box with name "IE343 Engineering Economics Section 2 Tian Ni " in GRIS269 • If you did not get back your hw or quiz in class, you can go to GRIS269 “printing room” to find it out. IE 343 Fall 2011 HWs and Quizzes Return 2
• Quiz 2 will be given at the beginning of the class 4:30PM – 4:45PM next Wednesday Sep.14 • Quiz 2 will have 2 problems totally 10 points • You will have 15 minutes to finish quiz 2 • All quiz 2 problems will be selected from the following three sources. You will see the same problems but maybe with numbers changed • Please bring a CALCULATOR to the quiz IE 343 Fall 2011 Tips for Quiz 2 3

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• Three sources: 1. Homework 2 Problem 1-9 (solutions for Homework 2 will be posted on Blackboard Vista after Friday’s class Sep.9) 2. Examples on Lecture Notes (please refer to the full version lecture notes for the example solutions) Lec 4_Full: Example 2.1, Example 2.8 – 2.10 Lec 5_Full: Example 2.10 – 2.12 Lec 6_Full: Example 3.1 – 3.4 3. Examples on Textbook Chapter 2: Example 2-4 to 2-11 Chapter 3: Example 3.1 to 3-6 IE 343 Fall 2011 Tips for Quiz 2 4
• Linear Regression • Chapter 4 – The Time Value of Money – Simple Interest – Compound Interest – Simple Interest VS Compound Interest IE 343 Fall 2011 Last Time … 5

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HW Suggestions - Linear Regression Problems IE 343 Fall 2011 Step 1 : Please first use the formula to get the answer: n: is the number of observations or data points Step 2 : to verify your correctness, use Excel Linear Regression Refer to Excel-Chap3.xls Linear_Regression for example. 6 , ) ( ) )( ( 2 1 1 2 1 1 1 1 = = = = = = n i i n i i n i i n i i n i i i x x n y x y x n b . 1 1 1 0 n x b y b n i i n i i = = = x b b y 1 0 : Model Regression Linear + =
IE 343 Fall 2011 The Time Value of Money Which one would you prefer: Option A: You have \$10,000 cash today Option B: Assurance of receiving \$10,000 three years from now (You will receive it for sure!) 7

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IE 343 Fall 2011 The Time Value of Money First lesson from Time Value of Money: A dollar today is worth more than a dollar a year from now because of interest Don’t put your money in your mattress Money has time value ! 8
IE 343 Fall 2011 The Time Value of Money Why charge (or get) interest? Price paid for the use of borrowed money Money can be used to produce additional wealth Interest reflects peoples’ time preference for consumption 9

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Formula: P : The principal is the initially invested money. i
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## This note was uploaded on 01/28/2012 for the course IE 343 taught by Professor Vincent,g during the Winter '08 term at Purdue.

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Lec%209_Full(1) - IE 343 Engineering Economics Lecture 9...

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