Engineering Economy
Engineering Economy
8th Edition
ISBN: 9781259683312
Author: Blank
Publisher: MCG
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Chapter 1, Problem 14P
To determine

Calculation of interest rate.

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A company that manufactures general-purpose transducers invested $2 million 4 years ago in high-yield junk bonds. If the bonds are now worth $2.8 million, what rate of return per year did the company make on the basis of (a) simple interest, and (b) compound interest? (c) What is the spreadsheet function to find the answer for compound interest?
A broadband service company borrowed $2 million for new equipment and repaid the loan in amounts of $200,000 in years 1 and 2 plus a lumpsum amount of $2.2 million at the end of year 3. What was the interest rate on the loan?
A $10,000 loan amortized over 5 years at an interest rate of 10% per year requires payments of $2638 to completely remove the loan when interest is charged on the unrecovered balance of the principal. If interest is charged on the original principal instead of the unrecovered balance, what is the loan balance after 5 years, provided the same $2638 payments are made each year?
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