Answer to Question #97908 in Engineering for MAHATHIR

Question

(a) Differentiate between simple interest and compound interest. Which one commonly
used in personal and professional financial transactions?
(b) Determine the future equivalent of RM 8,000 invested for 20 years if using the
interest rate stated below:
i. 5% simple interest per year.
ii. 5% compound interest per year.
iii. 5% interest per year, continuously compounded.
2
(c) Suppose that certain EOY cash flows are expected to be RM 1,000 for the second
year, RM 2,000 for the third year, and RM 3,000 for the fourth year and that, if
interest is 15% per year, it is desired to find
i. present equivalent value at the beginning of the first year
ii. uniform annual equivalent value at the end of each of the four years

Answer 1

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