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Lesson-4-Gradient-Series

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Lesson-4-Gradient-Series

Uploaded by

q62602574
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Engineering

Economics
Engr. Jackie Princess Guiquing
Lesson 4:

Gradient Series
Learning Objectives:

1. Define and clearly articulate the concept of


gradient series
2. Differentiate uniform arithmetic gradient
and geometric gradient
3. Solve problems involving gradient series
UNIFORM ARITHMETIC
GRADIENT

- a sequence consisting of end-of-period payments,


where each payment increases or decreases by a
constant value
UNIFORM ARITHMETIC
GRADIENT
1+ⅈ 𝑛−1 𝐺 1+ⅈ 𝑛−1
𝐹=𝐴 + −𝑛
ⅈ ⅈ ⅈ
F: single future amount
G: constant change in the periodic amount
A: amount at the end of 1st period
i: rate of interest
n: number of interest periods
GEOMETRIC GRADIENT

- a sequence consisting of end-of-period payments,


where each payment increases or decreases by a
fixed percentage
GEOMETRIC GRADIENT

𝐴 1 − 𝑤𝑛 1+𝑔
𝑃= 𝑤=
1+ⅈ 1−𝑤 1+ⅈ
P: present worth
𝐴
P= 𝑛 if i = g A: amount at the end of 1st period
i: rate of interest
1+ⅈ
g: percentage increase/decrease in payment
n: number of interest periods
EXAMPLES:

1. A certain machine purchased today shall be paid in 3 annual


unequal payments with no down payment. If the company agrees that
the first payment is Php120,000 at the end of the first year and have
to increase that payment by Php30,000 per year for the next
remaining years until the end of the 3rd year, how much is the present
worth of the machine if the company charges 12% annual interest?
EXAMPLES:

2. Annual deposits were made in the fund


earning 10% per annum. The first deposit was
2,000 and each deposit thereafter was 200 less
than the preceding one. Determine the amount
in the fund after sixth deposit.
EXAMPLES:

3. Annual maintenance costs for a machine are


Php1,500 this year and estimated to increase
10% each year every year. What is the present
worth of the maintenance costs for 4 years if
i=8%?
EXAMPLES:

4. Miss Santos deposited P1,000, P1,500,


and P2,000 at the end of the 2nd year, 3rd
th
year and 4 year, respectively in a savings
account which earned 10% per annum.
What will be the future worth of his savings
after 10 years.
EXAMPLES:
5. Sir James, believing that life begins at 40, decide to
retire and start enjoying life at the age of 40. He
wishes to have upon his retirement a sum of money.
On his 21st birthday, he deposited 20,000 and increase
his deposit by 15% each year until he will become 40.
If the money is deposited in a super savings account
which earns 15% interest compounded annually, how
much will he get on his 40th birthday?
EXAMPLES:
6. Dr. Quack Quack plans to make a series of Gradient
type withdrawals from his savings account over a 10
year period beginning at the end of the second year.
What equal annual withdrawals would be equivalent
to a withdrawal of 1000 at the end of the second year,
2000 at the end of the third year, 9000 at the end of
the 10th year. If the bank pays 9% compounded
annually.
ANS: 3797.8

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