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F 24 EE Assignment 01

The document contains a series of financial problems involving calculations for interest rates, investment returns, and savings needed to meet future financial goals. It includes scenarios such as calculating the time for an investment to grow, determining annual savings for machinery investment, and setting aside funds for future payments. Additionally, it addresses contributions needed for future education savings and cost recovery for software investments.

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13 views2 pages

F 24 EE Assignment 01

The document contains a series of financial problems involving calculations for interest rates, investment returns, and savings needed to meet future financial goals. It includes scenarios such as calculating the time for an investment to grow, determining annual savings for machinery investment, and setting aside funds for future payments. Additionally, it addresses contributions needed for future education savings and cost recovery for software investments.

Uploaded by

studygeek223
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Question # 01:

a) Calculate how long it will take for 25,000 to become exactly 45,000 if the interest rate is 9.2%
compounded quarterly?
b) Mr. Ahsan invested 1,500 in the year 2005; he is expecting to get 3,500 in the year 2025.
Solve for the approximate rate of return he will get if the rate is compounded every year.

Question # 02:
BioChem Corp., a company that sells specialty research chemicals, is considering investing in
new machinery to reduce packaging costs by optimizing the product-to-container fit. If the new
equipment costs $180,000 to purchase and install now, solve for how much the company must
save each year for 6 years to justify the investment if the interest rate is 12% per year.

Question # 03:
Beta Enterprises needs to make the following payments at the end of the respective years. Solve
for how much they should set aside today to meet these obligations if the interest rate is 6%
semi-annual.

Year Amount
4 10,000
7 9,000
10 18,000
13 5,000

Question # 04:
Hydro Systems, Ltd., a manufacturer of precision pressure gauges, is considering updating its
equipment now or delaying it. If the cost today is $175,000, calculate the equivalent amount 9
years from now at an interest rate of 8% compounded quarterly.

Question # 05:
Mr. Bilal is planning to accumulate funds for his child's higher education. He wants to ensure
that he has a total of 5 million currency units saved up by the time his child is ready for college
in 10 years. To achieve this goal, he decides to save through an annuity, making annual
contributions at the end of each year. He estimates that he can earn an annual interest rate of
10% on his savings. Calculate how much Mr. Bilal needs to contribute at the end of each year to
reach his goal of 5 million currency units in 10 years.
Question # 06:
Tech Innovations, a maker of smart sensors, believes it can reduce its defect rate by 15% if it
purchases new quality control software. The cost of the new software after 4 years will be
$250,000. Calculate how much the company would have to save each year for 4 years to recover
its investment if it uses a minimum attractive rate of return of 13% per year.

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