Quiz #1 Solutions

1. (15 points)

1. x = number of campers

Total cost = Fixed cost + Variable cost

= 48,000 + 80 (12) x

Total revenue = 120(12) x

2. Break-even when Total cost = total revenue

48000 +960x = 1440x

x = 100

3. capacity is 200 campers

200 x 80% = 160

1440(160) - [48000+960(160)] = 28800

2. (10 points)

F = P(1+i)^n, i = 0.10/365, n =365x2.5

F = $1925.76

3. (10 points)

A = $1500, n = 40, i = 12.2%, F= ?

F = 1500 (F/A, 40, 12.2%) = $1,216,404

Index fund Returns vary every year.

4. (15 points)

Nominal interest rate = 12(1.5%) = 18%

Effective interest rate = (1+0.015)^12 -1 = 19.56%