ASSIGNMENT # 2

Q.1: A sum of $25,000 earns interest at a rate of 7 percent per year compounded annually. How
long will it take for the investment to grow to 60,000?

Q.2: How much money must be invested at the end of each quarter if the objective is to
accumulate $250,000 after 8 years? Assume interest is earned at the rate of 10 percent per year
compounded quarterly. How much interest will be charged?

Q.3: Determine the monthly payment necessary to repay a $16,000 loan if interest is computed
at 12 percent per year compounded monthly. Assume the period of the loan is 4 years. How
much interest will be paid over the 4-year period?

Q.4: Consumer prices have been increasing at an average rate of 6 percent per year compounded
quarterly. The base price on a particular modal Chevrolet is $14,500. What will the expected
base price of this same model be 5 years from now?

Q.5: How much money must be deposited at the end of each year if the objective is to
accumulate $100,000 by the time of the fifth deposit? Assume interest is earned at the rate of 15
percent per year compounded annually. How much interest will be earned on the deposits?

Q.6: Determine the present value of a series of 60 monthly payments of $2,500 each which
begins 1 month from today. Assume interest of 12 percent per year compounded monthly.

Q.7: Solve the following systems of linear equations by using (i) the Cramer’s rule (ii) the
matrix-of-cofactors approach.

(a) 𝑥1 + 3𝑥2 – 2𝑥3 = 1 (b) 𝑥1 + 𝑥2 + 𝑥3 = −2

2𝑥1 − 4𝑥2 + 𝑥3 = −16 3𝑥1 − 4𝑥3 = 22

5𝑥1 + 2𝑥2 − 4𝑥3 = 21 𝑥1 + 2𝑥2 + 5𝑥3 = −18

Q.8: Determine the inverse of the following matrix by using (i) the matrix-of-cofactors approach
(ii) the Gaussian approach.

10 3 −2 4 10 −2
(a) (3 −2 7 ) (b) ( 8 −3 −5)
1 2 −3 −6 −3 3
Q.9: A company estimates that the demand for its product fluctuates with the price it charges.
The demand function is

𝑞 = 280,000 − 400𝑝

Where 𝑞 equals to the number of units demanded and 𝑝 equals the price in dollars. The total cost
of producing 𝑞 units of the product is estimated by the function

𝐶 = 350,000 + 300𝑞 + 0.0015𝑞 2

(a) Determine how many units 𝑞 should be produced in order to maximize annual profit.
(b) What price should be charged?
(c) What is the annual profit expected to equal?

Q.10: The total cost and total revenue functions for a product are

𝐶(𝑞) = 40,000 + 25𝑞 + 0.002𝑞 2

𝑅(𝑞) = 75𝑞 − 0.008𝑞 2

(a) Using the marginal approach, determine the profit-maximizing level of output.
(b) What is the maximum profit?

Q.11: A major airline purchases a particular type of plane at a cost of $40,000,000. The company
estimates that average capital cost and average operating cost are a function of 𝑥, the number of
hours of flight time. The salvage value of a plane (in dollars) is expressed by the function

𝑆(𝑥) = 36,000,000 − 10,000𝑥

Average operating cost, stated in dollars per hour of flight time, is estimated by the function

𝑂(𝑥) = 500 + 0.40𝑥

(a) Determine how many hours a plane should be flown before replacement if the objective
is to minimize the sum of average capital and average operating cost per hour.
(b) What is the minimum cost per hour?
(c) What is the salvage value expected to equal?
Q.12: A company is hiring persons to work in its plant. For the job the persons will perform,
efficiency experts estimate that the average cost 𝐶 of performing the task is a function of the
number of persons hired 𝑥. Specifically,

𝐶 = 0.003𝑥 2 − 0.216 ln 𝑥 + 5

(a) Determine the number of persons who should be hired to minimize the cost.
(b) What is the minimum average cost?

Q.13: A national charity is planning a fund-raising campaign in a major city having a population
of 2 million. The percentage of the population who will make a donation is estimated by the
function.
𝑅 = 1 − 𝑒 −0.02𝑥
where 𝑅 equals the percentage of the population and 𝑥 equals the number of days the campaign
is conducted. Past experience indicates that the average contribution in this city is $2 per donor.
Costs of the campaign are estimated at $10,000 per day.
(a) How many days should the campaign is conducted if the objective is to maximize net
proceeds (total contributions minus total costs) from the campaign?
(b) What are maximum net proceeds expected to equal?
(c) What percentage of the population is expected to donate?

Q.14: The population of a country is estimated by the function

𝑃 = 125𝑒 0.035𝑡
where P equals the population (in millions) and t equals time measured in years since 1990.
(a) What is the population expected to equal in the year 2000?
(b) Determine the expression for the instantaneous rate of change in the population.
(c) What is the instantaneous rate of change in the population in the year 2000?

Q.15: A firm sells each unit of a product for $250. The cost function which describes the total
cost C as a function of the number of units produced and sold x as

𝐶(𝑥) = 50𝑥 + 0.1𝑥 2 + 150

(a) Use the marginal approach to determine the profit-maximizing level of output.
(b) What is total revenue at this level of output?
(c) What is total cost at this level of output?
(d) What is total profit at this level of output?