Engineering Economy

INDIVIDUAL ASSIGNMENT

Student name : Đỗ Thành Duy ID :IEIEIU20048

4.2 What is the future equivalent of $1,000 invested at 6% simple interest per year for 3½years?

I = $1,000 x 3,5 x 0.06 = $210

 The total at the end of 3,5 years: $1,000 + $210 = $1210
4.8 Jonathan borrowed $10,000 at 6% annual compound interest. He agreed to repay theloan with five
equal annual payments at end-of-years 1–5. How much of the annualpayment is interest, and how much
principal is there in each annual payment?

P = $10000, i = 6%, N = 5
A=P
[ i (1+i ) N
( 1+i ) N ]
=P( A /P , i % , N)

A = $10,000 x 0.2374

A = $2,374
Year Amount Interest Total Principal Total
owed at accrued for money payment end of
beginning of year owed at year
year end of payment
year
1 $10,000 $600 $10,600 $1774 $2374
2 $8226 $493.56 $8719.56 $1880.44 $2374
3 $6345.56 $380.73 $6726.29 $1992.27 $2374
4 $4352.29 $261.14 $4613.43 $2112.86 $2374
5 $2239.43 $134.37 $2373.8 $2239.63 $2374
Total $31163.28482 $1869.797089
 Engineering Economy

4.9 Suppose you contribute $10 per week ($520 per year) into an interest-bearing accountthat earns 6% a
year (compounded once per year). That’s probably one less pizza perweek! But if you contribute faithfully
each week into this account, how much money wouldyou have saved through the compounding of interest
by the end of 15 years?

P= A [ ( 1+i )N −1
i ]= A (F / A , i% , N )

F = $520 x (F/A, 6%, 15) =  $520 x (23.276) = $12103.52

4.10 A lump-sum loan of $5,000 is needed by Chandra to pay for college expenses. She hasobtained small
consumer loans with 12% interest per year in the past to help pay forcollege. But her father has advised
Chandra to apply for a PLUS student loan chargingonly 8.5% interest per year. If the loan will be repaid
in full in five years, what is thedifference in total interest accumulated by these two types of student loans?

F=P ×(1+i)N
 i = 12%
F = $5000 x (1 + 0.12)5 = $8811.71
 I = $8811.71 - $5000 = $3811,71

 i = 8.5%
F = $5000 x (1 + 0.085)5 = $7518.28
 I = $7518.28 - $5000 = $2518.28

Difference in interest = $3811.71 - $2518.28 = $1293.4

So, the difference in total interest accumulated by these two types of
student loans is $1,293.22
4.12 A 12-cylinder heavy-duty diesel engine will have a guaranteed residual value of$1,000 in 5 years.
Today (year 0) the equivalent worth of this engine is how much if theinterest rate is 9% per year?
−N
P=F ×(1+i )

$1000 = P x (1 + 0.09)5
 P = $650

4.13 You just inherited $10,000. While you plan to squander some of it away, how muchshould you
deposit in an account earning 5% interest per year if you’d like to have $10,000in the account in 10 years?
 Engineering Economy

P=F ×(1+i)− N =10,000 $ ×(1+ 0.05)−10=¿$6139.132535

4.24 The Dominion Freight Company has invested $50,000 in a new sorting machine thatis expected to
produce a return of $7,500 per year for the next 10 years. At a 7% annualinterest rate, is this investment
worthwhile?

P= A [
( 1+i )N −1
i ]
= A (P / A ,i % , N )

P = $7500 x (P/A, 0.07, 10) 

= $7500 x (7.024) 
= $52680
 the investment is worthwhile

4.30 Luis wants to have $2,000,000 in net worth when he retires. To achieve this goal, heplans to invest
$10,000 each year (starting one year from now) into an account that earns10% interest compounded
annually. The amount of time before Luis can retire as amultimillionaire is how many years?

P= A [ ( 1+i )N −1
i ]= A (P / A ,i % , N )

$ 2,000,000=$ 10,000 x [ ( 1+10 % ) N −1

10 % ]
=> (F/A, 0.1, N) = 200
=> N = ~32 ( years)