engineering economic

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Ahmad is considering investing RM2000 to Ali's project at an interest rate 6% compound annually for 5 years or investing RM2000 to Rosli at 7% per year simple interest for 5 years. From your point of view which option is better and state your reason

  • engineering economic -

    a. P1 = Po(1+r)^n.

    r = (6%/100%) = 0.06 = APR expressed as a decimal.

    n = 1Comp./yr * 5yrs = 5 compounding periods.

    P1 = $2676.45.

    b. P2 = Po + Po*rt.

    P2 = 2000 + 2000*0.07*5 = $2700.

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