ENGINEERING ECONOMY – 61471 and 67223
HOME WORK #3
ANSWER THE FOLLOWING QUESTIONS
Q1. For an interest rate of 0.5% per quarter, determine the nominal interest rate per (a)
semiannual period, (b) year, and (c) 2 years.
Q2. For an interest rate of 12% per year compounded every 2 months, determine the nominal
interest rate per (a) 4 months, (b) 6 months, and (c) 2 years.
Q3. For an interest rate of 10% per year, compounded quarterly, determine the nominal rate per
(a) 6 months and (b) 2 years.
Q4. What effective interest rate per 6 months is equivalent to 14% per year, compounded
semiannually?
Q5. An interest rate of 16% per year, compounded quarterly, is equivalent to what effective
interest rate per year?
Q6. An interest rate of 1% per month is equivalent to what effective rate per 2 months?
Q7. An interest rate of 12% per year, compounded monthly, is equivalent to what nominal and
effective interest rates per 6 months?
Q8. What effective interest rate per year, compounded continuously, is equivalent to a nominal
rate of 13% per year?
Q9. What nominal rate per quarter is equivalent to an effective rate of 12.7% per year,
compounded continuously?
Q10. A company wants to have $85 million available in 3 years. How much money must the
company set aside now in an account that earns interest at a rate of 8% per year, compounded
quarterly?
Q11. A present sum of $5000 at an interest rate of 8% per year, compounded semiannually, is
equivalent to how much money 8 years ago?
Q12. A company projects that the cost of steel bodies for certain valves will increase by $2 every
3 months. If the cost for the first quarter is expected to be $80, what is the present worth of the
costs for a 3-year period at an interest rate of 3% per quarter?
Q13. Deposits of $100 per week are made into a savings account that pays interest of 6% per
year, compounded quarterly. Identify the payment and compounding periods.
Q14. Determine the F/P factor for 3 years at an interest rate of 8% per year, compounded
quarterly.
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