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# Name: ___________________________ Department: ____________________

## ISE 220 Eng. Econ. HOMEWORK 1-4 Class: Tue Thu

Q1 (25)
If you invest 2000 TL in a bank account today with effective yearly interest rate of 9.6% what will
be the value at the end of 36 years?
a) Draw cash flow diagram. (5 points)
b) Write equation using factor notation and calculate. (10 points)
c) If average inflation rate for 36 years is estimated as 6% what will be the Final Value in
Constant TL? (10 points)

Q2 (20)
Compute the value of C in the following cash flow diagram. First write equation to solve with fac-
tor notations. Assume i = 10%, compounded annually. (20 points)

Name: ___________________________
By Halil POSACI 2013
Q3 (25)
Your company decided to invest for a fully automated lathe machine. You have searched three
companies and found the lowest price as 180,000TL. For crediting this investment the lowest
interest rate is given by CRD Bank as nominal 10% per year compounded quarterly.
You wish to pay your debt in six years at the end of each quarter. What will be the quarterly
payments?
a) Calculate quarterly payments after drawing the cash flow diagram and writing equation using
factor notation. (15 points)
b) Calculate yearly effective interest rate. (5 points)
c) If average yearly inflation rate is 6% what is the yearly inflation free interest rate? (5 points)

Name: ___________________________
By Halil POSACI 2013
Q4 (30)
A proposed project that requires an investment of \$100,000 (now) is expected to generate a
series of five equal payments (\$60,000 each in constant dollars). Assume that the average
inflation rate is 4%, and the market interest rate (i) is 10% (effective yearly) during this
inflationary period. What is the equivalent present worth of this investment?
a) Draw the cash flow diagram for this project in constant-dollars. (5 points)
b) Draw the cash flow diagram for this project in actual-dollars. (5 points)
c) Calculate present worth in actual-dollars after writing equation with factor notations. (10
points)
d) Calculate present worth in constant-dollars using inflation free interest rate and writing
equation with factor notations. (10 points)