# sol9 - MATH MODULE 9 Solutions to Exercises 1 Under...

This preview shows pages 1–2. Sign up to view the full content.

1. Under option (a), you would owe Louie 1000(1.02) 364 = \$1,350,400.29, whereas under option (b) you would owe him only 1000(1.1) 52 = \$142,042.93. The weekly rate is much more of a bargain! 2. We need to solve the equation 300 = 100(1.25) t for t . Simplifying, we have 3 = (1.25) t , and taking the log of both sides and rearranging gives us t = log3/log1.25 = 4.923 years. Hence, Unidyne should reach an annual sales level of \$300 million in 2015. 3. In Leutonia, the rate of inﬂation between 2010 and 2011 was (275 – 250)/250 = 10%/year, whereas in Granfaloonia it was (97 – 88)/88 = 10.227%/year. The inﬂa- tion rate is higher in Granfaloonia. 4. We use the formula V 0 = 100(1 + i ) t , where t is first 5 years and then 10 years. The present discounted values with t = 5 are (a) \$100; (b) \$78.35; (c) \$62.09; (d) \$40.19; (e) \$13.17; and (f) \$3.13. The present discounted values with t =10 are (a) \$100; (b) \$61.39; (c) \$38.55; (d) \$16.15; (e) \$1.73; and (f) \$0.10. 5. With instantaneous compounding, the rate of growth of your real income is simply the rate of growth of your nominal income minus the rate of inﬂation, or .05 – .03 = 2%/year. Your real income in 2015 will be 100,000 e gt = 100,000 e .

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern