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Engineering Economics SOLVED PROBLEMS ( 100% DETAILED CORRECT ANSWERS )

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Luna, Jon Vincent Nico M. Solved Problem Engineering Economy/CPE-401 CHAPTER 4 1. A Corporation sold an issue of 20-year bonds, having a total face value of 10,000,000 for 9,500,000. The bonds bea... r interest at 16%, payable semiannually. The company wishes to establish a sinking fund for retiring the bond issue and will make semiannual deposit that will earn 12%, compounded semiannually. Compute the annual cost for interest and redemption of these bonds. Solution: F=10,000,000 i = 12% = 6% r = 16% = 8% 2 2 Interest on the bond per period = Fr = (10,000,000)(0.16)= 1,600,000 A =10,000,000 = 64,615.36 (1+0.06)40-1 0.06 Total Annual Expense= 2(64,615.36)+1,600,000= 1,729,230.718 2. A company has issued 10-year bonds, with face value of 1,000,000 in 1,000 units. Interest at 16% is aid quarterly. If an investor desires to earn 20% nominal interest on 100,000 worth of these bonds, what would the selling rice have to be? Solution: C = 100,000 r = 16%/2 = 8% i= 20%/4 = 5% Interest on the bond per period = Fr = (100,000)(0.04)= 4,000 P=Fr((1-(1+.05)-40/0.05) + C(1.05-40) = 82,840.91 3. A 1,500-bond which will mature in 10 years and with a bond rate of 15% payable annually is to be redeemed at par at the end of this period. If it is sold now for 1,390, determine the yield at this price. Given: F = 1,500 N = 10 r = 15% P = 1,390 Solution: P= Fr(1-(1+i)-10/i) + C(1+i) 1390 = 15009(0.15) (1-(1+i)-10/i) + 1500(1+i) = 0.1655(100%) = 16.55% [Show More]

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