Homework 3 ES 316

[Due: THURSDAY, October 6 (at the beginning of the class)]

1. Problem related to Future Value a Uniform Series:

Dimitri plans to deposit $600 in a bank account at the end of each year for 4 years. The bank pays an interest of
8%, compounded annually. Immediately after the fourth deposit, how much can Dimitri withdraw from the bank
account?

2. Problem related to Sinking Fund:

You want to buy equipment for $12,000. You want to deposit in a savings account a uniform amount at the end of
the 6th month and at the end of the 12th month so that you will have the required $12,000 at the end of the 12th
month. The bank pays an APR of 16%, compounded semi-annually. What is the amount you need to deposit each
time?

3. Problem related to Capital Recovery:

Sara has spent $9,600 to purchase an equipment today. The equipment will be used for 7 years. If the bank pays
an interest of 8%, compounded annually, how much must Sara save in the bank account at the end of each year
for 7 years to recover the cost of the equipment?

4. Problem related to Cash Flows without any basic pattern:

Daniel has deposited some money in a bank account today. He plans to make three withdrawals in order to spend
the deposited money as follows.

The first withdrawal of $1,000 at the end of the first year; the second withdrawal of $2,000 at the end of the
second year and the third withdrawal of $1000 at the end of the third year.

If the bank pays an interest of 8%, compounded annually, how much has Daniel deposited today?

Formulae and Values from Appendix:

Future value of a uniform series: F = A x (F/A, i, n)

Sinking fund: A = F x (A/F, i, n)

Capital recovery: A = P x (A/P, i, n)

Present value of a single amount: P = F / (1+i)n

The interest rate: 8%

Uniform Payment Series
n Find A given F Find A given P Find F given A Find P given A
(A/F) (A/P) (F/A) (P/A)
1 1 1.08 1
2 .4808 .5608 2.08
3 .3080 .3880 3.246
4 .2219 .3019 4.506
5 .1705 .2505 5.867
6 .1363 .2163 7.336
7 .1121 .1921 8.923
8 .0940 .1740 10.637