VISTA 2000 Engineering Economics Homework 2 NAME 1. Compute the value of X for equivalence using a 10% interest rate. $600 $400 $400 S200 $200 A friend was left $50,000 by her departed uncle. She has decided to put it into a savings account. She finds the following interest rates at different institutions. 3/8% compounded annually: maximize her return, which should she select? 2. 4)4% compounded quarterly, and 4 1/8% compounded continuously. If she wishes to 3. What amount of an annuity needs to be purchased on a woman's 40 birthday so that it pays her 30 equal semi-annual payments of $1000 each, the first payment being on her 50t birthday. The nominal interest rate is 4% compounded semi-annually. 4. Mr. Smith withdrew $1000 from a savings account and invested it in common stock. At the end of 5 years, he sold the stock and received a check for $1307. If Mr. Smith had left his money in the savings account, he would have earned a nominal rate of 5% compounded quarterly. He would like to compute a comparable interest rate on his stock investment. Based on quarterly compounding, what nominal annual interest rate did he receive on the stock? What effective interest rate did he receive? 1555, King Henry borrowed money from his bankers on the condition that he pay 5% of the loan value at each fair (there were 4 fairs per year) until he had made 40 payments. At that time, the loan would be considered repaid. What effective annual interest rate did pay? 5. in King Henry 6, A debt of $5000 can be repaid, with an interest rate of 8%, by the following payments. Find x. Payment $500 $1000 $1500 $2000 SX Year