EBK CONTEMPORARY ENGINEERING ECONOMICS
6th Edition
ISBN: 9780134123950
Author: Park
Publisher: PEARSON CUSTOM PUB.(CONSIGNMENT)
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Question
Chapter 3, Problem 45P
(a):
To determine
Calculate the present value.
(b):
To determine
Calculate the new present value.
(c):
To determine
Calculate the present value with decreasing rate.
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Suppose that an oil well is expected to produce 100,000 barrels of oil during its first year of production. However, its subsequent production (yield) is expected to decrease by 10% over the previous years' production. the oil well has a proven reserves of 1,000,000 barrels.
a) Suppose that the price of oil is expected to be $60 per barrel for the next several years. What would be the present worth of the anticipated revenue stream at an interest rate of 12% compounded annually over the next seven years?
b) Suppose that the price of oil is expected to start at $60 per barrel during the first year, but to increase at the rate of 5% over the previous year's price. What would be the present worth of the anticipated revenue stream at an interest rate of 12% compounded annually over the next seven years?
c) Consider part (b) again. After three year's production, you decide to sell the oil well. what would be a fair price?
Note:-
Do not provide handwritten solution. Maintain accuracy and…
Suppose you expect to receive a $10,000 bonus from your employer in two years upon completing your college degree. If the interest rate is 5%, what is the present value of the $10,000?
The present value is
$9,070.30
$9,523.80
$11,025.00
$10,500.00
Suppose that a 2-year zero-coupon bond with face value $1,000 currently sells at $840, while a 1-year zero-coupon bond with face value $1,000 currently sells at $920. You are considering the purchase of a 2-year coupon bond that pays coupon annually. The face value of this coupon bond is $1,000 and coupon rate is 12% per year.
Required:
a. What is the yield to maturity of the 2-year zero-coupon bonds?
b. What is the current price of the 2-year coupon bond?
c. What is the forward rate of the second year?
d. If the expectation hypothesis is accepted, what are (1) the expected price of the coupon bond at the end of the first year and (2) the expected holding period return on the coupon bond over the first year?
e. Will the expected rate of return be higher or lower if you accept the liquidity preference hypothesis?
Chapter 3 Solutions
EBK CONTEMPORARY ENGINEERING ECONOMICS
Ch. 3 - Prob. 1PCh. 3 - Prob. 2PCh. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - Prob. 5PCh. 3 - Prob. 6PCh. 3 - Prob. 7PCh. 3 - Prob. 8PCh. 3 - Prob. 9PCh. 3 - Prob. 10P
Ch. 3 - Prob. 11PCh. 3 - Prob. 12PCh. 3 - Prob. 13PCh. 3 - Prob. 14PCh. 3 - Prob. 15PCh. 3 - Prob. 16PCh. 3 - Prob. 17PCh. 3 - Prob. 18PCh. 3 - Prob. 19PCh. 3 - Prob. 20PCh. 3 - Prob. 21PCh. 3 - Prob. 22PCh. 3 - Prob. 23PCh. 3 - Prob. 24PCh. 3 - Prob. 25PCh. 3 - Prob. 26PCh. 3 - Prob. 27PCh. 3 - Prob. 28PCh. 3 - Prob. 29PCh. 3 - Prob. 30PCh. 3 - Prob. 31PCh. 3 - Prob. 32PCh. 3 - Prob. 33PCh. 3 - Prob. 34PCh. 3 - Prob. 35PCh. 3 - Prob. 36PCh. 3 - Prob. 37PCh. 3 - Prob. 38PCh. 3 - Prob. 39PCh. 3 - Prob. 40PCh. 3 - Prob. 41PCh. 3 - Prob. 42PCh. 3 - Prob. 43PCh. 3 - Prob. 44PCh. 3 - Prob. 45PCh. 3 - Prob. 46PCh. 3 - Prob. 47PCh. 3 - Prob. 48PCh. 3 - Prob. 49PCh. 3 - Prob. 50PCh. 3 - Prob. 51PCh. 3 - Prob. 52PCh. 3 - Prob. 53PCh. 3 - Prob. 54PCh. 3 - Prob. 55PCh. 3 - Prob. 56PCh. 3 - Prob. 57PCh. 3 - Prob. 58PCh. 3 - Prob. 59PCh. 3 - Prob. 60PCh. 3 - Prob. 61PCh. 3 - Prob. 62PCh. 3 - Prob. 63PCh. 3 - Prob. 64PCh. 3 - Prob. 65PCh. 3 - Prob. 66PCh. 3 - Prob. 67PCh. 3 - Prob. 68PCh. 3 - Prob. 69PCh. 3 - Prob. 70PCh. 3 - Prob. 71PCh. 3 - Prob. 72PCh. 3 - Prob. 1STCh. 3 - Prob. 2STCh. 3 - Prob. 3ST
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