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Chapter 4
The Time Value of Money
Year Amount owed at Interest owed for Amount owed at Total end-of-
start of year each year end of year year payment
1 P= $8,000 iP= $800 P(1+i)=$8,800 0
2 P(1+i) = $8,800 iP(1+i) =$ 880 P(1+i)2=$9,680 0
3 P(1+i)2 = $9,680 iP(1+i)2 = $968 P(1+i)3=$10,648 0
4 P(1+i)3 = $10,648 iP(1+i)3 = $1,065 P(1+i)4=$11,713 F=$11,713
In general, we see that F = P(1+i)N, and the total amount to be repaid is $11,713
So,
So,
EE textbook, 15edition:
Prob. 4.2, 4.8, 4.9, 4.10, 4.12, 4.13, 4.24, 4.30
Copyright ©2009 by Pearson Education, Inc.
Engineering Economy, Fourteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
VIII. Deferred Annuities (Uniform Series)
We need to be able to handle cash flows that do not occur until
some time in the future.
P = G (P/G, i%, N)
A = G (A/G, i%, N)
F = G (F/G, i%, N)
P0 = ?
Copyright ©2009 by Pearson Education, Inc.
Engineering Economy, Fourteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
X. Geometric gradient
Sometimes cash flows change by a constant rate, , each period -
this is a geometric gradient series.
P= i
P=
Where is the initial cash flow in the series.