CVE4000 Engineering and A Construction Economy Question 1 (10 points):Williams Construction Inc. is building a new facility that will cost $46 million. Wil

CVE4000 Engineering and A Construction Economy Question 1 (10 points):Williams Construction Inc. is building a new facility that will cost $46 million. Williams Construction will borrow $43 million from Bank of America and pay the remainder immediately as a down payment.Williams Construction will pay 8% interest but will make no payment for 4 years, at which time the entire amount will be due.How much will Williams Construction’s payment be?

Question 2 (10points):James Madison is considering a new investment fund with a semiannual interest of 4.0 %.Any money he invests would have to be left in the fund for at least five years if he wanted to withdraw it without penalty.

What is the nominal interest rate on this investment?
What is the annual effective interest rate?
If James deposits $10,000 in the fund now, how much will it be worth in five years?

Question 3 (10 points):Traffic at the Babcock St/University Blvd. intersection is 5000 cars per day.A traffic study by the City of Melbourne indicates that the traffic is expected to grow at a continuous rate of 4% per year.How much traffic will be expected at the end of 5 years?Hint:This is a continuous compounding problem.

Question 4 (10 points):Mike withdrew $1,280 from a savings account and invested in common stock.At the end of 5 years, Mike sold the stock for $1,487.In the savings account he would have received an interest rate of 4%, compounded quarterly.He would like to compute a comparable interest rate on his common stock investment.

Draw a cash flow diagram for the stock investment.
What effective annual interest rate did he receive from the stock investment?
Based on quarterly compounding, what nominal annual interest rate did he receive on his investment in stock?

Question 5 (10 points):Compute the present worth of the following cash flows given an interest of 5%. Name:
CVE 4000 – Summer 2019
Homework #3
Due: By Midnight Monday June 10, 2019
(50 Points Total)
Question 1 (10 points): Williams Construction Inc. is building a new facility that will cost $46 million.
Williams Construction will borrow $43 million from Bank of America and pay the remainder immediately
as a down payment. Williams Construction will pay 8% interest but will make no payment for 4 years, at
which time the entire amount will be due. How much will Williams Construction’s payment be?
Question 2 (10points): James Madison is considering a new investment fund with a semiannual interest
of 4.0 %. Any money he invests would have to be left in the fund for at least five years if he wanted to
withdraw it without penalty.
a) What is the nominal interest rate on this investment?
b) What is the annual effective interest rate?
c) If James deposits $10,000 in the fund now, how much will it be worth in five years?
Question 3 (10 points): Traffic at the Babcock St/University Blvd. intersection is 5000 cars per day. A
traffic study by the City of Melbourne indicates that the traffic is expected to grow at a continuous rate
of 4% per year. How much traffic will be expected at the end of 5 years? Hint: This is a continuous
compounding problem.
Question 4 (10 points): Mike withdrew $1,280 from a savings account and invested in common stock.
At the end of 5 years, Mike sold the stock for $1,487. In the savings account he would have received an
interest rate of 4%, compounded quarterly. He would like to compute a comparable interest rate on his
common stock investment.
a) Draw a cash flow diagram for the stock investment.
b) What effective annual interest rate did he receive from the stock investment?
c) Based on quarterly compounding, what nominal annual interest rate did he receive on his
investment in stock?
Question 5 (10 points): Compute the present worth of the following cash flows given an interest of 5%.

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