E NGINEERING ECONOMY TUTORIAL 3 Spring SEMESTER Assistants: Iman Roozbeh 1.

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E NGINEERING ECONOMY TUTORIAL 3 Spring SEMESTER Assistants: Iman Roozbeh 1

For an interest rate of 8% per year, determine: a) Effective interest rate per year if interest is compounded daily? b) Effective interest rate semiannually if interest is compounded daily? c) Effective interest rate per year if interest is compounded monthly? d) Effective interest rate semiannually if interest is compounded every six months? 2

4-37) Fieldsaver technologies, a manufacturer of precision laboratory equipment, borrowed $2 million to renovate one of its testing labs. The loan was repaid in 2 years through quarterly payments that increased by $50,000 each time. At an interest rate of 3% per quarter, what was the size of the first quarterly payment? 3

A person intends to invest10,000$ now, 30,000$ four years from now and 15,000$ six years from now in a bank account with interest rate of 6% per year, compounded semiannually. What would be the future value of this investment in year 10? 4

4-49) A Taiwan-based chemical company had to file for bankruptcy because of a nation-wide phase-out of methyl tertiary butyl ether(MTBE). If the company recognizes and invests $50 million in a new ethanol production facility, how much money must it make each month if it wants to recover its investment in 3years at an interest rate of 2% per month, compounded continuously ? 5