Page 257 - Analysis, Synthesis and Design of Chemical Processes, Third Edition

(9.1)

The yearly earnings rate is

(9.2)

where i is termed the simple interest rate.
s

From Equation (9.2), we have

(9.3)

Example 9.2 illustrates this concept.

Example 9.2

You decide to put $1000 into a bank that offers a special rate if left in for two years. After two years you
will be able to withdraw $1150.
a. Who is the producer?

b. Who is the investor?
c. What are the values of P, F, i , and n?
s

Solution

a. Producer: The bank has to produce $150.00 after two years.
b. Investor: You invest $1000 in an account at the beginning of the two-year period.
c. P = $1000 (given)
F = $1150 (given)
n = 2 years (given)

From Equation (9.2),
i = ($1150 – $1000)/($1000)/(2) = 0.075 or 7.5% per year
s

In Example 9.2, you were the investor and invested in the bank. The bank was the “money producer” and