Question
1) An industrial chemical engineer student wishes to request a loan of $3000 to meet the payment for the semester. The University finances the above
1) An industrial chemical engineer student wishes to request a loan of $3000 to meet the payment for the semester. The University finances the above amount at a monthly interest rate of 2.5%. Determine the following: a) The total amount of principal plus simple interest owed after 3 years (consider that no interim payments are made).
b) The total amount of principal plus compound interest owed after 3 years (consider that no interim payments are made).
c) The nominal interest rate when interest is compounded monthly.
d) The effective interest rate when interest is compounded monthly.
2) As a consultant, you receive a cash flow consisting of $15,000 per year in an amount at the end of each year for 10 years. Interest is 9.5% per year compounded annually. Determine the present value at time zero and the future value at the end of 10 years of this cash flow.
3) The future value of a cooling tower is $90,000, and the useful life of the tower is estimated to be 10 years. How much must be saved annually in an annuity at an interest rate of 6% to obtain enough funds to replace the tower at the end of 10 years? If the salvage value of the tower is $5,000, determine the value of the asset (ie, the total book value of the tower) at the end of 6 years based on straight-line depreciation.
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