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Assignment 3

This document contains engineering economy assignment problems related to nominal and effective interest rates with solutions. It includes questions about calculating nominal interest rates over different time periods from a given quarterly rate, equivalencies between nominal and effective rates with different compounding periods, present worth calculations for rental costs and revenue losses discounted at given rates, and determining the future and ending values of accounts with regular deposits or withdrawals compounded semiannually or continuously over multiple years.

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Chalermchai New Kawin
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165 views

Assignment 3

This document contains engineering economy assignment problems related to nominal and effective interest rates with solutions. It includes questions about calculating nominal interest rates over different time periods from a given quarterly rate, equivalencies between nominal and effective rates with different compounding periods, present worth calculations for rental costs and revenue losses discounted at given rates, and determining the future and ending values of accounts with regular deposits or withdrawals compounded semiannually or continuously over multiple years.

Uploaded by

Chalermchai New Kawin
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Engineering Economy Assignment 3

255330
Chapter 4 Nominal and Effective Interest Rate
Due Date:
4.5 For an interest rate of 0.50% per quarter, determine the nominal interest rate
per (a) semiannual period, (b) year, and (c) 2 years.
((a) = 1% (b) 2% (c) 4%)
4.11 What nominal interest rate per year is equivalent to an effective 16% per
year, compounded semiannually? (r = 15.41%)
4.13 What compounding period is associated with nominal and effective rates of
18% and 18.81% per year, respectively? (m = 2)
4.24 In an effort to ensure the safety of cell phone users, the Federal
Communications Commission (FCC) requires cell phones to have a specific
absorbed radiation (SAR) number of 1.6 watts per kilogram (W/kg) of tissue
or less. A new cell phone company estimates that by advertising its
favorable 1.2 SAR number, it will increase sales by $1.2 million 3 months
from now when its phones go on sale. At an interest rate of 20% per year,
compounded quarterly, what is the maximum amount the company can
afford to spend now for advertising in order to break even? (P =
$1,142,880)
4.31 Lotus development has a software rental plan called SmartSuite that is avail-
able on the World Wide Web. A number of programs are available at $2.99
for 48 hours. If a construction company uses the service an average of 48
hours per week, what is the present worth of the rental costs for 10 months
at an interest rate of 1% per month, compounded weekly? (Assume 4
weeks per month.) (P= $113.68)
4.40 An engineer deposits $300 per month into a savings account that pays
interest at a rate of 6% per year, compounded semiannually. How much will
be in the account at the end of 15 years? Assume no interperiod
compounding. (F = $85,636)
4.41 At time t = 0, and engineer deposited $10,000 into an account that pays
interest at 8% per year, compounded semiannually. If she withdrew $1000
in months 2, 11, and 23, what was the total value of the account at the end
of 3 years? Assume no interperiod compounding. (F = $9046)

1
4.45 What effective interest rate per 6 months is equal to a nominal 2% per month,
compounded continuously? (i = 12.75%)
4.47 Corrosion problems and manufacturing defects rendered a gasoline pipeline
between El Paso and Phoenix subject to longitudinal weld seam failures.
Therefore, pressure was reduced to 80% of the design value. If the reduced
pressure results in delivery of $100,000 per month less product, what will be
the value of the lost revenue after a 2 – year period at an interest rate of 15%
per year, compounded continuously? (F = $2,782,130)

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