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Contemporary Engineering Economics 6th Edition by Chan Park
Edition 6ISBN: 978-0134105598Contemporary Engineering Economics 6th Edition by Chan Park
Edition 6ISBN: 978-0134105598 Exercise 9
Travis Wenzel has $2,000 to invest. Usually, he would deposit the money in his savings account, which earns 6% interest compounded monthly. However, he is considering three alternative investment opportunities.
• Option 1. Purchasing a bond for $2,000. The bond has a face value of $2,000 and pays $100 every six months for three years, after which time the bond matures.
• Option 2. Buying and holding a stock that grows 11 % per year for three years.
• Option 3. Making a personal loan of $2,000 to a friend and receiving $150 per year for three years.
Determine the equivalent annual cash flows for each option, and select the best option.
• Option 1. Purchasing a bond for $2,000. The bond has a face value of $2,000 and pays $100 every six months for three years, after which time the bond matures.
• Option 2. Buying and holding a stock that grows 11 % per year for three years.
• Option 3. Making a personal loan of $2,000 to a friend and receiving $150 per year for three years.
Determine the equivalent annual cash flows for each option, and select the best option.
Explanation
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Annual worth
Annual worth refers to t...
Contemporary Engineering Economics 6th Edition by Chan Park
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