METU NCC

ECO 280
Spring 2014 - 2015
Problem set 3

3.23) What is the future worth of the series of equal year end deposits of $2.000 for 15 years
in a savings account that earns 8% interest if the following were true?
a) All deposits are made at the end of each year.
b) All deposits are made at the beginning of each year.
3.36) You are considering buying a piece of industrial equipment to automate a part of your
production process. This automation will save labor costs by as much as $40.000 per year over
10 years. The equipment costs $250.000. Should you purchase the equipment if your interest
rate is 10%?

3.39) Five annual deposits in the amounts of $7.500, $6.000, $4.500, $3.000, and $1.500, in
that order, are made into a fund that pays interest at a rate of 8% compounded annually.
Determine the amount in the fund immediately after the firth deposit.

3.41) What is the equal payment series for 10 years that is equal to payment series of $16.000
at the end of first year, decreasing by $1.000 each year over 10 years? Interest is 8%
compounded annually.

3.47) What is the amount of 10 equal annual deposits that can provide five annual withdrawals?
A first withdrawal of $12.000 is made at the end of year 11 and subsequent withdrawals
increase at the rate of 8% per year over the previous years withdrawal. Determine the amounts
for the following rates.
a) The interest rate is 12% compounded annually.
b) The interest rate is 9% compounded annually.