Engineering Economy IEN255 Chapter 2 Leftovers  Geometric Gradient (not linear but a percent!)  example 2.24

Engineering Economy IEN255 Chapter 2 Big Hint!!!!  table 2.3

Engineering Economy Composite cash flows  Fig 2.36

Engineering Economy Composite cash flows  Fig 2.37

Engineering Economy Unknown Interest Rate  Example 2.27

Engineering Economy IEN255 Nominal Interest  Nominal  18% compounded quarterly  nominal = APR  fig 3.1

Engineering Economy Effective Interest  Truly represents interest earned  if nominal = r  M compounding periods per year i a = (1 + r/M) M - 1 (3.1)

Engineering Economy Effective vs Nominal Interest  table 3.2

Engineering Economy Effective Interest Rates per Payment Period  Generalized form  if nominal = r  M compounding periods per year  C interest periods per payment period  K payment periods per year i a = (1 + r/M) C - 1 = (1 + r/CK) C - 1 (3.2)

Engineering Economy Effective Rate per Payment Period  Figure 3.3

Engineering Economy Continuous Compounding  Generalized form I = e r/K - 1 (3.3)  annual interest rate (K=1) i a = e r/K - 1 (3.4)

Engineering Economy Periods the same or different  Payment period = compounding period  Payment period  compounding period

Engineering Economy Useful hint!!!!  figure 3.12

Engineering Economy Continuous Payments  table 3.2

Engineering Economy Changing Interest Rates  Example 3.13