Homework #5 IEMS 326
(due Tuesday, 11/20/14)
Problem 1 - Consider the following decision tree. Solve the decision tree.
Make sure to prune the sub-optimal branches.
a) Write the present value in the oval at each branching point.
b) What is the optimal ini

Homework #1 IEMS 326
(due Thursday, 10/9/14)
1. A $5000 loan was to be repaid with 8% simple annual interest. A total
of $5350 was paid. How long had the loan been outstanding?
2. The United States recently purchased $1 billion of 30-year zerocoupon bonds

Homework #6 IEMS 326
(due Tuesday, 12/2/14)
Problem 1 Suppose there are n mutually uncorrelated assets.
The return on asset i has variance 2i. The expected rates of
return are unspecified at the point. The total amount of asset i in
the market is Xi. We l

Homework #2 IEMS 326
(due Thursday, 10/16/10)
1. Suppose you had $10,000 to invest for one year. You are deciding
between a savings account with a 2% annual interest rate compounded
daily (alternative A) and one with a 2% annual interest rate
compounded m

Homework #4 IEMS 326
(due Tuesday, 11/11/14)
1. Our company is considering the installation of a new material handling
system that costs $150,000. This system is expected to save our company
$32,000 per year in labor costs for the next 15 years. Maintenan

Homework #3 IEMS 326
(due Thursday, 10/30/14)
1. A project has a life of 10 years, and no salvage
value. The firm uses an interest rate of 12% to
evaluated engineering projects. The project has
an uncertain first cost and net revenue.
First Cost
P
Net
P
R