Interest Formulas

Equal Payment
Series
Module 7
Chapter 3
Contemporary Engineering Economics
Copyright 2010

Contemporary Engineering Economics, 5th edition, 2010

Equal Payment Series

F

Wo
e
r
u
t
u
F
nt
Equivale

0
A

rth

P
0

N
0

Contemporary Engineering Economics, 5th edition, 2010

Equal-Payment Series Compound

Amount Factor

Formula

Contemporary Engineering Economics, 5th edition, 2010

An Alternate Way of Calculating

the Equivalent Future Worth, F F
A

A(1+i)N-2
A

A
A(1+i)N-1

Contemporary Engineering Economics, 5th edition, 2010

Example 3.14
Uniform Series:
Find F, Given i,
A, and N

Given: A = $3,000, N

= 10 years, and i = 7%
per year
Find: F

Excel Solution:
Contemporary Engineering Economics, 5th edition, 2010

Example 3.15
Handling Time
Shifts: Find F,
Given i, A, and N

Given: A = $3,000, N

= 10 years, and i = 7%
per year
Find: F

o Each payment has been shifted to one year

earlier, thus each payment would be compounded
for one extra year

Excel Solution:
Contemporary Engineering Economics, 5th edition, 2010

Sinking-Fund
Factor: Find A,
Given i, A, and
F
Formula Sinking Fund

Factor
A $5,000(A / F,7%,5)

Given: F = $5,000, N

= 5 years, and i = 7%
per year

$869.50

$5,000
Find: A

=PMT(7%,5,0,5000)
A
Excel Solution:
Contemporary Engineering Economics, 5th edition, 2010

Example 3.17
Comparison of
Three Different
Investment Plans

Given: Three

investment plans and i

= 8%
Find: Balance on the
65th birthday
Contemporary Engineering Economics, 5th edition, 2010

Example 3.14
Uniform Series:
Find F, Given i,
A, and N

Given: A = $3,000, N

= 10 years, and i = 7%
per year
Find: F

Excel Solution:
Contemporary Engineering Economics, 5th edition, 2010

How Long
Would It
Take to Save
$1 Million?

Contemporary Engineering Economics, 5th edition, 2010

Example 3.18
Uniform Series:
Find A, Given P,
i, and N

Capital Recovery

Factor
Given: P = $250,000,

N = 6 years, and i = 8%
per year
Find: A
Formula to use:

Excel Solution:
Contemporary Engineering Economics, 5th edition, 2010

end of year 2
Find: A
Step 1: Find the

equivalent amount of
Example
borrowing 3.18
at the endof
year 1:
Deferred
Loan
Repayment

Step 2: Use the

capital recovery factor

to find the size of
annual installment:

Contemporary Engineering Economics, 5th edition, 2010

Example 3.20
Uniform Series:
Find P, Given A,
i, and N

Present Worth Factor

Given: A =

$10,576,923, N = 26
years, and i = 5% per
year
Find: P
Formula to use:

Excel Solution:
Contemporary Engineering Economics, 5th edition, 2010