Assignment #1 Math 184 Section 921 Due Monday May 14, 2012 before test Note: This assignment

is graded based on correctness, clarity of explanation, and the quality of presentation. 1. The monthly demand equation for an electric utility company is estimated to be p = 60 (105)x, where p is measured in dollars and x is measured in thousands of kilowatt-hours. The utility has xed costs of $7,000,000 per month and variable cost of $30 per 1000 kilowatt-hours of electricity generated. (a) Find the value of x and the corresponding price for 1000 kilowatt-hours that maximize the utilitys prot. (b) Suppose that rising fuel costs increase the utilitys variable costs from $30 to $40. Should the utility pass all this increase of $10 per thousand kilowatt-hours on to consumer? Explain your answer. 2. A corporation issues a bond costing $200 and paying interest compounded monthly. The interest is accumulated until the bond reaches maturity after 5 years. Suppose that the mature bond is worth $500. (a) What is the annual (nominal) interest rate? (b) The bond can be withdrawn pre-maturely at a penalty of $100. How many months should one wait until the accumulated interest can overcome the penalty upon pre-mature withdrawal.