John R. Canada, William; G. Sullivan, Dennis; J. Kulonda.

Capital investment analysis for engineering and management, 3rd ed. 2005,
Pearson Prentice Hall

Chapter 4
Computations InvoIving Interest

What equal monthly investment is required over a period of 360 months to achieve a balance of
$2,000.000 in an investment account that pays monthly interest of 1/2%?

How many monthly payments are necessary to repay a loan of $15,000 with an interest rate of 1%
per month and end-of-month payments of $250?

Using an 8% annual compound interest rate, what investment today is needed in order to
withdraw $2,000 annually for 10 years? Assume the first withdrawal occurs in one year. What
if the first withdrawal does not occur for 5 years?

When Juan was 25, he decided to begin planning for retirement in 40 years. Beginning
with his 26th birthday, he invested $5,000 annually in an account that paid annual compound
interest of 6%. How much was in the account immediately after his 40th deposit?

Maria purchased a refrigerator for $1,000. The store financed the refrigerator by charging 0.5%
monthly interest on the unpaid balance. If the refrigerator is paid for with 30 equal end-of-
month payments, what will be the size of the monthly payments? If the first payment is not
made until I year after the purchase, what will be the size of the monthly pavments?

A $100,000 investment is made over a 10-year period. A return of $23.000 occurs at the end of the
first year. Each successive year yields a return that is $2,000 less than the previous year's
return. If money is worth 8%, what is the equivalent present worth for the investment? What
is the equivalent annual worth for the investment? What is the equivalent future worth for
the investment?

Marcida invests $50,000 in a fund that provides incentives for long-range investments. During the
first year, the fund pays interest at an annual compound rate of 4%. Thereafter, the interest
rate earned on the cumulative investment balance increases by 1/4% per year. Hence, the
account will pay annual compound interest of 10% during the 25th year of the deposit. How
much will the investment be worth after 25 years?

What single sum of money today is equivalent to five future cash flows, with the first cash flow of
$5,000 occurring 5 years from today? Subsequent cash flows are $500 smaller than the
previous cash flow. Money is worth 8% compounded annually.