If an initial bank deposit of $5,000 yields an account value of $12,000 at the end of 10 years, what is the interest rate at work?
If an initial deposit of $250,000 is made into an escrow account that pays 9% interest annually, what is the maximum amount that can be withdrawn (equally) at the end of each year for 12 years, leaving an account balance or $0 after the 12th year?
Under consideration is the purchase of a new air conditioning system. It costs $30,000 to purchase and will be used for 5 years. The electric bill paid at the end of each year will be reduced by $9,000 with the new system. The new unit will require a $2,000 overhaul at the end of the 2nd and 4th years. The new unit will have a salvage value of $11,000. The interest rate is twelve percent.
a) What is the present equivalent value of the savings yielded by the new system?
b) What is the rate of return for the new system?