Suggested problems_Chp 8_sol

Suggested problems_Chp 8_sol - Suggested problems for...

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Suggested problems for Chapter 8 – Solutions 1. (8.3) f = 4% per year; How long until $1 (actual) will be worth $0.50 (real) in today's purchasing power? From Equation 8-1, with k = 0, we have (R$) N = $0.50 = ($1) N ) 04 . 1 ( 1 (1.04) N = 2 N (ln (1.04)) = ln (2) N = ) 04 . 1 ln( ) 2 ln( 18 years In 18 years, the dollar's purchasing power will be one-half of what it is now if the general price inflation rate is 4% per year. 2. (8.9) By using Equation 8-1, but with each year's general price inflation taken into account separately , the R$ equivalents in year 0 dollars are calculated as follows. EOY Salary (R$ in Year 0) 1 $34,000 (P/F,2.4%,1) $34,000 1 (1 0.024) = $33,203 2 $36,200 (P/F,2.4%,1)(P/F,1.9%,1) $36,200 1 (1 0.024) 1 (1 0.019) = $34,692 3 $38,800 (P/F,2.4%,1)(P/F,1.9%,1)(P/F,3.3%,1) $38,800 1 (1 0.024) 1 (1 0.019) 1 (1 0.033) = $35,996 4 $41,500 (P/F,2.4%,1)(P/F,1.9%,1)(P/F,3.3%,1)(P/F,3.4%,1) $41,500 1 (1 0.024) 1 (1 0.019) 1 (1 0.033) 1 (1 0.034) = $37,235
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3. (8.11) The electricity bill is $400M in year 0 and $920M in year 10. This difference in cost
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This note was uploaded on 02/07/2012 for the course IE 343 taught by Professor Vincent,g during the Spring '08 term at Purdue.

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Suggested problems_Chp 8_sol - Suggested problems for...

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