2. A new piece of equipment costs $3,600 and has an annual maintenance cost of $500 (assume the maintenance cost occurs in year 7). The salvage value after 7 years is $500. Assuming an annual interest rate of 5%, what is the present worth?

a. The annual nominal interest rate on the unpaid portion of a contract is 17%. Find the effective annual interest rate if the interest is compounded quarterly.

b. Capitalize a $10 million renovation cost that occurs at EOY 20 with an annual discount rate of 7.25%.

c. How much to you need in the bank today to cover a $10 million renovation that occurs at EOY 20 with a 7.25% discount rate compounded continuously?

d. What amount today will accumulate into $20,000 5 years from now if the nominal interest rate is 4% compounded quarterly (that is, four times per year)?