An engineering technology group just purchased new CAD software for $5,000 now a
ID: 1219572 • Letter: A
Question
An engineering technology group just purchased new CAD software for $5,000 now and annual payments of $500 per year for 6 years starting 3 years from now for annual upgrades. What is the present worth of the payments if the interest rate is 8% per year? The Highway department expects the cost of maintenance for a piece of heavy construction equipment to be $5,000 in year 1, to be $5,500 in year 2, and to increase annually by $500 through year 10. At an interest rate of 10% per year, determine the present worth of 10 years of maintenance costs. Suppose you have just borrowed $7,500 at 10% nominal interest compounded quarterly. What is the total lump-sum compounded amount to be paid by you at the end of a 10 year loan period? How many deposits of $100 each must you make at the end of each month if you desire to accumulate $3,350 for a new home entertainment center? Your savings account pays 9% nominal interest, compounded monthly. You have used your credit card to purchase automobile tires for $340. Unable to make payments for 7 months, you then write a letter of apology and enclose a check to pay your bill in full. The credit card company's nominal interest rate is 16.5% compounded monthly. For what amount should you write the check? An electrical engineer expects to deposit $1,000 now, $3,000 4 years from now, and $1,500 6 years from now and earn a rate of 12% per year compounded semiannually through a company sponsored savings plan. What amount can she withdraw 10 years from now? What is the effective annual interest rate? A Visa credit card issued through Frost Bank carries an interest rate of 1% per month on the unpaid balance. Calculate the effective rate per semiannual and annual periods. If the card's interest rate is stated as 3.5% per quarter, find the effective semiannual and annual rates. A loan shark company lends money on the following terms: "If we give you $50 on Monday, you owe us $60on the following Monday". What nominal interest rate per year (r) is the loan shark company charging? What effective interest rate per year (I) is the loan shark company charging? If the loan shark company started with $50 and was able to keep it, as well as all the money they received, loaned out at all times, how much money did they have at the end of one year?Explanation / Answer
a) Present worth has been calculated below:
Present worth is $6834.9
Year Cash outFlow PV @ 8% p.a PV of cash flow(cash flow*pv@8%) 0 5000 1 5000 1 0 0.9259 0 2 0 0.8573 0 3 0 0.7938 0 4 500 0.735 367.5 5 500 0.6806 340.3 6 500 0.6302 315.1 7 500 0.5835 291.75 8 500 0.5403 270.15 9 500 0.5002 250.1 PV 6834.9