Exam%201-sol

Exam%201-sol - IElVI 3503 Engineering Economic Analysis...

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Unformatted text preview: IElVI 3503 Engineering Economic Analysis (cross-listed as) IEM 3513 Economic Decision Analysis Spring 2009 Exam 1 I You have 75 minutes to complete this exam. 0 This exam is worth 100 points and has 10 numbered pages, excluding the 10% and 15% mmpoundinterest factor tables 0 Exam consists of two parts. Part I will not receive partial scores. a This is an open book exam. You are allowed to use your course textbook, one 8.5 X 11 sheet of notes (both sides). In addition, you are allowed to use the formula sheet and tables provided with the exam, and a calculator. 0 Assume compound interest scheme unless specified otherwise. All interest rates are expressed over respective compounding periods unless specified otherwise. Make other reasonable assumptions only if necessary. 0 Be specific and show your work— No credit will be given to unjustified answers (Does not apply to Part I). o For problems in Part II draw cash—flow diagrams to illustrate and write down the factors you use in the standard factor notation first. * You must print and Sign your name below for your exam to be considered for grading. “I am aware of, and abide by the Academic Integrity Policy of the University. I have neither given nor received unauthorized aid on this academic work. ” Name: Signature: Z Course Number: Best of luck I Part (20 points) Pb 1. (4 points) How long will it take a $1200 deposit to accumulate up to $1992 at a simple interest rate of 11% per year? B190 0+ n“. n) 2' WW n a b Answer: 6 W (3 points) How long does it take a $1200 deposit to double at a simple interest rate of 10% per year? Pb 2. _. 1. “Answer: '7'} ' /L Pb 3. (3 points) How long does it take a $1900 deposit to double at a simple interest rate of 10% per year? Answer: VB i Mi, Aw Pb 4. (3 points) (P/F,i,n)(P/F,t,m) = (P/F,z',n + m) TRUE 0r FALSE? 86%)“ DR m c} n) i") m) ' W Answer: 0 viii—h mm) Pb 5. (3 points) (JP/Rt, 1)+(P/F,7L,2)+(P/F,i,3)+- - -+(P/F,i,n—1)+(P/F:i,n) is equal to which single compound interest factor? Answer: (‘1 ) Pb 6. (4 points) If your credit card offers 18% APR on the balances compounded Answer: $7.27. ‘: -——/ :50“? gm 09,360+ in): ,9 743,60 9‘3 gin» 8355 Part II. (80 points) Pb 1. (20 points) Find A, so that the two following payment plans are equivalent at an interest {_____. rate of 10% per year. —nnnn nmmmn cash Flow (in $) . I ‘ 5 my among, = A0 whoa—+42 % 33) 94 9.37 A : $2g7'010 Pb 2. (25 points) Prof. Benjamin Breeg is planning to make a contribution to his alma mater. The donation is to be made over a 5~year period beginning now, a total of six equal payments. It is intended to support a scholarship program which supports one student per year for 25 years, with the first scholarship to be awarded immediately (a total of 26 scholarships). The cost of tuition per student is $5000 per year and is expected to stay that amount for 5 more years. From year 61 it is expected to increase by $50 per year for 10 more years (until year 15). From year 161 a year—to»year cost increase of 1% is expected for the student tuition. If the college can invest the donations in a fund that earns interest at the rate of 10% per year, what size must the donations be? What must the donations be if it were to support three students instead of just one? Hints: Identify the size of the cashfiow (tuition cost) at t = 15; Deal with cash—flows in years 15—25 separately. 93°F. ‘8; H7 Pb 3. (20 points) Find the equal yearly payment A in years 075 that is equivalent to the given costs. Assume 3‘ = 10% per year with quarterlx compounding. Pb 4. (15 points) Rossi recently purchased an YZF—Rfi for $10,190. His dealer allows him to pay it back in 6 equal yearly amounts at interest rates set by the parent company. If the interest rate is expected to be 10% per year for three years from now, and 15% per year after that, calculate the yearly payment he needs to make at the end of each year. lojmo a; [EMU : 4(2437 + 91-2334 0793) :7 A= $242+.a/ ...
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Exam%201-sol - IElVI 3503 Engineering Economic Analysis...

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