Exponential and Reciprocal Functions Chapter 6, problem P6.

26 A, B, C, and D 1) What is the present value of nine annual cash payments of $4,000, to be paid at the end of each year using an interest rate of 6% F = $4,000 I = 6% K= 9 years Present value at year 9 P = F (1+i) ^-k P = $4,000 (1+0.06) ^-9 P = $ 2,367.594 P = F (1+i) ^-k Present value PV PV PV PV PV PV PV PV PV Year 1 2 3 4 5 6 7 8 9 $ $ $ $ $ $ $ $ $ $ 3,773.58 3,559.99 3,358.48 3,168.37 2,989.03 2,819.84 2,660.23 2,509.65 2,367.59 27,206.77

Total present value is

2) What is the present value of $ 15,000 to be paid at the end of 20 years, using an interest rate of 18% F = $15,000 I = 18% K= 20 years P = F (1+i) ^-k P = $15,000 (1+0.18) ^-20 P = $ 547.58

3) How much cash must be deposited in a saving account as a single amount in order to accumulate $ 300,000 at the end of 12 years, assuming that the account will earn 10% interest? F = $300,000 I = 10% K= 12 years P = F (1+i) ^-k P = $300,000 (1+0.1) ^-12 P = $ 95,589.24 4) How much cash must be deposited in a saving account (as a single amount) in order to accumulate $ 50,000 at the end of seven years, assuming that the account will earn 12% interest? F = $50,000 I = 12% K= 7 years P = F (1+i) ^-k P = $50,000 (1+0.12) ^-7 P = $ 22,617.46 Topic 6, exploration 8b P = 67.38 (1.026) ^t What would the population in 1990 have been if growth had continued in the same pattern?
Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 t 0 1 2 3 4 5 6 7 8 9 10 Population in Millions 67.38 69.13 70.93 72.77 74.67 76.61 78.60 80.64 82.74 84.89 87.10

The population in 1990 will be 87.10 million people if the rate of growth is constant.

Chapter 8, study questions 1 and 2 1. Why is economic growth important? Why could the difference a 2.5 percent and a 3 percent annual growth rate be of great significance over several decades? In a growth economy, there is an increasing the capacity to produce more products for society. It can ease the burden of scarcity and relax societys constraints on production. Growth is measured as the change in the gross domestic product of a country. Economic growth is the ultimate purpose for the survival of the economy. The small change in the rate of economic growth rate is really a matter. For example, the current real GDP is 10.5 trillion, the difference between 2.5 and 3 percent rate of growth is about 52.5 billion of output each year. The half percent represents tremendous difference in measuring real GDP for one year. This difference will be huger over several decades. In addition, in a poor country, the difference of one half percent in the rate of growth may mean the difference between starvation and mere hunger.

2. Suppose an economys Key Question Suppose an economys real GDP is $30,000 in year 1 and $31,200 in year 2. What is the growth rate of its real GDP? Assume that population is 100 in year 1 and 102 in year 2. What is the growth rate of GDP per capita? The growth rate of real GDP [(31,200 30,000)/30,000] x 100% = 4% GDP per capita year 1 = 30,000 /100 = 300 GDP per capita year 2 = 31,200 / 102 = 305.88 The growth rate of GDP per capita [(305.88 -300)/300] x 100 %= 1.96%