A person lends 2000 for five years at 10 per annum simple in

A person lends $2000 for five years at 10% per annum simple interest, then the entire proceeds are invested for 10 years at 9% per year, compounded annually. How much money will the person have at the end of the entire 15-year period? Ans. $7102.09 1.27

Solution

1) Proceeds after 5 years = 2000 + 2000 x 10% x 5 = 3000 (= P + PRT/100)

FV of the proceeds (after 10 years) = 3000 x (1 + 9%)¹⁰ = $7102.09

2)

Usage based depreciation:

Depreciation per unit = (Cost - salvage value)/estimated units output

Depreciation per unit = 47000/500000 = $ 0.094 per unit

Depreciation expense = Depreciation per unit x No. of units produced/yr = 60000 x 0.094 = $5640

3)

payment each quarter = $12000

quarterly interest rate = 5.2%/4 = 1.3%

time period = 10 years or 40 quarters

FV = 12000 x (1 + 1.3%)³⁹ + 12000 x (1 + 1.3%)³⁸ + ... + 12000 x (1 + 1.3%)⁰

FV = $ 624369.81