Engineering Economics (DAY 12) 13. P3,500.00 was deposited in a bank account, 15 years ago.

Today it is worth
P10,000.00. Interest is paid semi-annually. Determine the interest rate paid on
Problem set #12 this account?
a.3.67% b.5.90% c.7.12% d.4%
1. The amount of the machine worth P2600.00 is borrowed 16% simple interest. 14. If the nominal interest rate is 6%, how much is P10,000 worth in 12 years in a
Find the amount after 10 months. continuous compounded account?
a.P1600.2 b.P1790.34 c.P1487.23 d.P2946.67 a.P20,544 b.P6750.00 c.P7288.47 d.P6350.00
2. Find the future amount of P25,000 after 4 years if simple interest is 14%. 15. You are given the option to borrow P5,000 you need for one year. Which of this
a.P29,500 b.P39,600 c.P29,700 d.P29,800 will you pay lesser interest. To borrow from a friend at an interest rate of 1.5%
3. A man borrowed P30,000 from Jan 18,2004 to November 3,2004 with 12% month or loan from a bank at a rate of 18% per year?
simple interest . Find the exact interest. a. You will pay P78.09 more than if you borrow from a bank
a.P2,852.46 b.P3,093 c.P5,083 d.P7,826 b. You will pay P78.09 less than if you borrow from a bank
4. A mother borrowed money from a bank with 22% simple interest. The interest is c. You will save P43.20 from borrowing from your friend
automatically deducted from the principal at the time the money is released. Find d. Borrowing from a bank will give P34.23 less in interest
the actual interest did charged him after 1 year. 16. Find the compound amount and interest if P4,500 is invested at 12%
a.12.97% b.14.82% c.28.21% d.18.37% compounded quarterly for 5 years and 9 months.
5. A man borrowed P300,000 from a bank and agreed to pay the loan at the end of a.P7,200 b.P8881.14 c.P3,864.95 d.P5934.79
a months. The bank discount the loan and give him 250,000. What is the rate of 17. Mr. Ayala borrows P1000. In 4 years the money become P2,500.00 compounded
discount? bimonthly. Find the nominal interest.
a.20.67% b.16.67% c.28% d.30% a.12.62% b.14.64% c.23.35% d.15%
6. A machine has a selling price of 400,000 after given 15% discount. Find the 18. Find the effective interest of 4% quarterly.
original amount. a.10.29% b.12.55% c.14.03% d.16.98%
a.P325,000 b.P350,000 c.P375,000 d.P470,588 19. A machine has a compound interest of 3,000 when invested at 14% compounded
7. P20,000 is borrowed at 12% compounded quarterly for 8 years. Find the amount bi-monthly after 12 years. Find the present amount of investment.
after 8 years. a.703.73 b.1572.03 c.7634.56 d.2937.45
a.P51,502 b.P71,208 c.P76,304 d.P80,395 20. A sum money is deposited now in a savings account. The effective annual
8. The company wanted to receive P500,000 6 years from now. Considering an interest rate is 12% and interest is compound monthly. How much money must
interest of 14% compounded semi-annually, find the amount earned of the be deposited to yield P8000.00 at the end of 11 months?
investment. a.P153.00 b.P446.00 c.P6547.79 d.P7210.63
a.P249,058 b.P222,006 c.P260,405 d.P279,197 21. Find the nominal rate which if converted semi-annually could be used instead of
9. P60,000 is invested in a bank at 8% compounded monthly for 8 years. Find the 12% compounded bi-monthly.
amount earned of the investment. a.10.58% b.11.28% c.9.38% d.12.24%
a.P75,038 b.P79,964.78 c.P53,547.4 d.P93,048.34 22. In how many years will an amount triple itself if invested at 10% compounded
10. An employee deposited an amount of 200,000 after his retirement 10 years ago. annualy?
The money now is worth P1,000,000. Find the annual interest did he receive. a.9.69 b.11.52 c.13.05 d.15.34
a.21.93% b.17.46% c.25.89% d.27.04% 23. In how many years will an amount quadruple itself if investment if interest is 14%
11. If P8,000 shall accumulate for 10 years at 12% compounded quarterly. Find the compounded quarterly.
compound interest at the end of 10 years. a.6.93 yrs b.10.07 yrs c.8.84 yrs d.11.28 yrs
a.P8456.28 b.P9456.28 c.P18,096.30 d.P11,456.28 24. When will an investment P20,000.00 double if the effective rate is 4% per month?
12. A sum of P5,000 is invested now and left for 6 years, at which time the principal a.1.47 b.9.0 c.6.5 d.10.2
is withdrawn. The interest that has accrued is left for another 6 years. If the 25. A student deposits P5,000.00 in a 10% account today. He intends to deposit
effective annual interest rate is 8%, what will be the withdrawal amount at the another P10,000.00 at the end of three years. He plans to purchase in 10 years a
end of 12th year? machine worth P20,000.00. Calculate the money that will be left in his account 4
a.P706.00 b.P4,656.48 c.P1774.00 d.P5,211.13 years after the purchase.
a.P18,237 b.P10,912 c.P21,250 d.P1,260.00
26. A machine costs P30,000 today. If inflation rate is 12% per year and interest is 37. A person pays interest on a loan semi-annually at a nominal annual interest rate
16% per year, what will be the appropriate future value of the machine, adjusted of 16%. What is most nearly the effective annual interest rate?
for inflation, in 10 years? a.15.5% b.15.7% c.16.4% d.16.6%
a.P306,300.00 b.P411,037.00 c.P289,500.00 d.1,260.00 38. Which of the following statements is NOT correct?
27. A product has a current selling price of P1500.00. If its selling price is expected a. A nominal rate of 12% per annum compounded quarterly is the same as
to decline at the rate 12% per annum because of obsolescence, what will be its 12%/4 = 3%/quarter.
selling price 8 years hence? b. $1 compounded quarterly at 3% for n yr has a future value of (1.03)4𝑛
a.P425.15 b.P202.75 c.P302.75 d.P539.45 c. Compounding quarterly at a nominal rate of 12%/yr is equivalent to
28. A company which manufacturer’s electric motors has a production capacity of compounding annually at a rate of 12.55%
250 motors a month. The variables costs are P150.00 per motor. The average d. Effective rate of return in options(A),(B),and (C) is the difference between
selling price of the motor is P250.00. Fixed cost of the company amount to 12.55% and 12%.
P20,000.00 per month which includes taxes. The number of motors that must be 39. A bank is advertising 9.5% accounts that yield 9.84% annually. How often is the
sold each month to break even is closed to: interest compounded?
a.40 b.150 c.200 d.160 a. Daily
29. A factory running 80% efficiency with a fixed cost of P80,000.00, variable cost b. Monthly
per unit of P130.00, selling price per unit of P400.00, and production capacity of c. Bimonthly
4000 units. What is the current profit of the factory if all products manufactured d. Quarterly
are sold? 40. Consider a deposit of $1000, to be paid back in 1 yr by $975. What are the
a.P1,352,000.00 b.P430,000.00 c.P1,066,000.00 d.P784,000 conditions on the rate of interest, i, in %/yr compounded annually, such that the
30. XYZ corporation manufacturers bookcases that it sells for P60.00 each. It cost net present worth of the investment is positive? Assume i ≥ 0%.
XYZ P35,000 salary payments. If the cost to produce one bookcase is P50.00, a. 0% ≤ i < 50%
how many cases must be sold each year for XYZ to avoid taking a loss? b. 0% ≤ i < 90%
a.2334 cases b.539 cases c.3500 cases d.2333 cases c. 12.5% ≤ i < 100%
31. At an annual rate of return of 8%, what is the future worth of $100 at the end of d. There are no conditions on I that will make this possible.
year 4? 41. Consider a deposit of $600, to be paid back in 1 yr by $700. What are the
a.$130 b.$132 c.$135 d.$136 conditions on the rate of interest, i, in %/yr compounded annually, such that the
32. A person invests $450 to be collected in 8 yr. Given the interest rate on the net present worth of the investment is positive? Assume i ≥ 0%.
investment is 14.5%/yr, compounded annually, most nearly what sum will be a. 12.5% ≤ i < 14.3%
collected 8 yr. from now? b. 0% ≤ i < 14.3%
a.$1050 b.$1130 c.$1240 d.$1330 c. 0% ≤ i < 16.7%
33. $1000 is deposited into a 9% account today. At the end of 2 yr. another $3000 d. 16.7% ≤ i < 100%
will be deposited. In 5 years, a $4000 purchase will be made. Approximately how 42. A steel drum manufacturer incurs a yearly fixed operating cost of $200,000. Each
much will be left in the account 1 yr after the purchase? drum manufactured cost $160 to produce sells for $200. What is the
a.$1230 b.$1420 c.$1540 d.$1690 manufacturer’s break-even sales volume in drums per year?
34. A firm borrows $2000 for a 6 yr at 8%, to be repaid in a lump sum at 12% at the a.1000 b.1250 c.2500 d.5000
end of 6 yr. At the end of 6 yr, the firm renews the loan for the amount due plus
$2000 more for 2 yr at 8%. What is the most nearly amount of the loan renewal?
a.$5280 b.$5750 c.$5510 d.$6140
35. A company invests $10,000 today to be repaid in 5 yr in one lump sum at 12%
compounded annually. If the rate of inflation is 3% compounded annually,
approximately how much profit, in present day dollar is realized over the 5 yr?
a.$3200 b.$5200 c.$5630 d.$7620
36. What is most nearly the effective annual interest rate on the loan if the nominal
interest rate is 12%/yr compounded quarterly?
a.11.8% b.12.0% c.12.3% d.12.6%
Engineering Economics (DAY 12) withdraws $4000 at the end of her 17th, 18th, 19th, and 20th years, how much
money will be left in the account at the end of her 21st year?
Problem set #13 A.$1700 B.$2500 C.$3400 D.$4000

1. A man borrowed P20,000 and promised to pay equal amount annually for 10 12. The following schedule of funds is available to form sinking fund.
years at 10% compounded annually. Find the annual amount. t = 0 yr, $5000; t = 1 yr, $4000; t = 2 yr, $3000; t = 3 yr, $2000
A.P1083.45 B.P2974.56 C. P3254.91 D.P7623.40 At the end of the fourth year, equipment costing $25,000 will have to be
2. An employee wanted to have P100,000 at the end of 8 years. What amount purchased as a replacement for old equipment. Money is valued at 20% by the
must he put in the bank quarterly at 12% compounded quarterly interest? company. At the time of purchased, how much money will be needed?
A.P1904.66 B.2978.34 C.P3745.34 D.4249.23 A. $820 B.$1000 C.$2000 D.$8200
3. A man desposit P5000 each year in the bank and becomes P79,687 in 10 13. $10,000 is invested at the beginning of a year in a 15% security and held for
years with annual interest. Find the annual interest of the investment. 5 yrs. During that time, the average annual inflation is 6%. Approximately
A.9% B.10% C.11% D.12% how much, in terms of year zero dollars, will be in account at maturity?
4. A man deposit P50,000 and withdrawn P6635.00 per year. Interest rate is A. $11,700 B. $13,400 C. $15,000 D. $15,400
8% annually. In how many years will a deposit become zero? 14. The following cash flow diagram presents an Investment of $400 and a
A.10 B.11 C.12 D.13 revenue of x at the end of years one and two. Given the discount rate of 15%
5. What is the most nearly the present worth of $100 annuity over a 10 yr period compounded annually, what must x approximately be for his set of cash
if the interest rate is 8%. flows to have a net present worth of zero?
A.$450 B.$530 C.$670 D.$700 A. $246 B. $255 C. $257 D. $281
6. With a 12 % interest, approximately how much money must be invested 15. What annuity over a 10 yr period at 8% interest is most nearly equivalent to a
today in order to withdraw %1000 per year at the end of ach year for 10 present worth of $100.
years? A. $12.50 B.$13.80 C.$14.10 D.$14.90
A.$4800 B.$5650 C.$5800 D.$6150 16. Mr. Richard borrowed $15,000 two years ago. The repayment terms of the
7. What is the present worth of two $100 payments at the end of third and loan are 10% interest for 10 yr and uniform annual payments. He just made
fourth years if the annual interest rate is 8%. his second payment. How much principal, most nearly, does he still owe?
A.$122 B.$153 C.$160 D.$162 A. $10,100 B.$11,700 C.$12,000 D.$13,000
8. Consider a project that involves the investment of $100,000 now and 17. Given that the discount rate is 15%, what is the equivalent uniform annual
$100,000 at the end of year 1. Revenues of $150,000 will be generated at cash flow for the following streams of cash flow?
the end of year 1 and 2. What is the most nearly the net present value of this Year0, $100,000; year1, $200,000; year2, $50,000; year3, $75,000
project if the effective annual interest rate is 10%? A. $158,100 B. $124,200 C. $106,250 D. $90,260
A.$43,300 B.$50,900 C.$69,500 D.$78,500 18. In a 5 yr, $18,000 will be needed to pay for a building renovation. In order to
9. An investment of x dollars is made at the end of each year fo 3 yr, at an generate this sum, a sinking fund consisting of three annual payments is
interest rate of 9% per year compounded annually. What will the dollar value established now. No further payments will be made after the third year. What
of the total investment be, mostly nearly, upon the deposit of the third payments are most nearly necessary if money is worth 15% per year?
payment? A. $2670 B. $2870 C. $3920 D. $5100
A.$0.77x B.$1.3x C.$2.3x D.$3.3x 19. Mr. Johnson borrows $100,000 at 10% effective annual interest. He must pay
10. If $500 is invested at the end of each year for 6 yr at an effective annual back the loan over 30 yr with uniform monthly payments due on the first day
interest rate of 7%, what is the most nearly the total dollar amount available of each month. Approximately what amount does Mr. Johnson pay each
upon the deposit of the sixth payment? month?
A.$3000 B.$3210 C.$3580 D.$4260 A. $840 B. $850 C. $870 D. $880
11. A student needs $4000/yr for 4 yr to attend college. Her father invested 20. What is the most nearly the internal rate of return on the following cash flow?
$5000 in a 7% account for her education when she was born. If the student t = 0 yr spend $100,000
t = 1 yr spend $50,000
 t = 2 yr receive $100,000 A. P30,048.23 B. P35,439.89 C. P37,084.11 D. P39,044.56
t = 3 yr receive $103,000 30. A machine has a maintenance of P40,000 in 2nd year, P60,000 in the 6th year
A. 15% B. 17.5% C. 18.2% D. 20.0% and P80,000 in the 8th year. If interest is 10% compounded annually, find the
21. An investment of $350,000 is made, to be followed by revenue of $200,000 equivalent equal annual maintenance of the machine for a period of 10
each year for three years. What is most nearly annual rate of return on years.
investment for this project? A. P14,973.45 B. P12,084.02 C. P16,965.70 D. P18,028.89
A. 15% B. 33% C. 42% D. 57% 31. A company expects that the material cost of the certain manufacturing
22. A man borrowed P30,000 and promised to pay the amount annually for 10 operation to be $15,000 per year. At an interest rate of 8% per year, the
years at the beginning of each period with interest rate of 16% compounded present worth of this cost over a five year project is closed to:
annually. Find the annual amount. A. $29,386 B. $56,220 C. $79,854 D. $59,891
A. P3092 B. P4973 C. P6530 D. P5351 32. A piece of machinery has a first cost of $35,000 with monthly operating cost
23. A man borrowed P190,000 at 10% compounded annually for 10 years and of $12,000. If the company wants to recover its investment in five years at an
promised to pay the amount starting 5 years from now. Find the annual interest rate f 1% per month, the monthly income must be closest to:
payment. A. $5,498 B. $6,386 C. $8,295 D. $12,779
A. P21,083.55 B. P23,827.55 C. P25,083.22 D. P27,099.34 33. If a person deposits $200 per month into an account which pays interest at a
24. A company issued 50 bonds of P1,500 face value each, redeemable at par at rate of 6% per year compounded monthly, the amount in the account at the
the end of 15 years. To accumulate the funds required for redemption, the end of five years would be nearest to:
firm established a sinking fund consisting of annual deposits, the interest rate A. $29,082 B. $13,954 C. $6,977 D. $7,992
of the fund being 4%. What was the principal in the fund at the end of the 34. A small company wants to have enough money saved to purchase a new
year 10th year? $200,000 warehouse in five years. If the company can invest money at 16%
A. P44,970.00 B. P38,378.00 C. P41,453.00 D. P37,519.00 per year the amount of money that must be invested each year is closed to:
25. A house and lot can be acquired a down payment of P500,000.00 and a A. $29,082 B. $36,920 C. $49,650 D. $63,960
yearly payment of P190,000, at the end of each year for a period of 10 years, 35. A company expects the cost of equipment maintenance to be $6,000 in years
starting at the end of 5 years from a date of purchases. If money is worth one, $6500 in year two, and amounts increasing by $500 per year through
14% compounded annually, what is the cash price of the property? year 10. At an interest rate of 10% per year, the present worth of
A. P710,100.00 B. P808,811.00 maintenance cost is nearest to
C. P963,253.88 D. P1,181,902.00 A. $38,220 B. $42,170 C. $48,313 D. $51,790
26. A piece of machinery can be bought for P12,000 or for P2000 down and 36. The cash flow associated with a stripper oil well is expected to be $4000 in
payments of P963.42 per year for 15 years. What is the annual interest rate month one, $3900 in month two, and amounts decreasing by $100 each
for the time payments? month through year five. At an interest rate of 12% per year compounded
A. 4.61% B. 3.81% C. 5.00% D. 11.00% monthly, the equivalent uniform monthly cash flow is closed to:
27. A parent on the day the child is born wishes to determine what lump sum A. $1,332 B. $1,673 C. $2,794 D. $4,327
would have to be paid into an account bearing interest at 8% compounded 37. A man applied for a loan with 12% compounded semi-annually. He promised
annually, in order to withdraw P25,000 each on the child’s 18th, 19th, 20th, and to pay an amount P20,000 semi-annually starting at 4 years from now for 10
21st birthdays. years. Find the amount stated in the loan.
A. P35,941.73 B. P33,941.73 C. P22,379.13 D. P25,941.73 38. A series of bank deposits of P2000 quarterly from 5th year to 11th year. If
28. The maintenance cost of the machine this year is expected to be P5,000. interest is 16% compounded quarterly, find the total amount at the 15th year.
The cost will increase P500 each year for the subsequent 9 years. The A. $177,177 B. $146,401.97 C. $197,177 D. $201,177
interest is 15% compounded annually. What is the approximate worth of the 39. A man is applied for a loan that pays P10,000 annually for 8 years starting
maintenance for the machine over full 10 years? today. If interest rate is 10% annually, find the present amount of the loan.
A. P14,814.67 B. P44,418.76 C. P82,414.67 D. P33,583.58 A. $58,684.19 B. $68,684.19 C. $78,684 D. $88,684.19
29. A man borrowed P50,000 and promised to pay annually for 10 years at 10% 40. A series of deposits of P1000 bi-monthly starting today up to 10th year. Find
interest. Find the amount unpaid after the 4th payment was made. the amount at the 12th year if the interest rate is 8% compounded bi-monthly.
 A. $98,106 B. $107,976.16 C. $138,106 D. $178,106
41. A man wants to have P1,000,000 in the bank 20 years from now. He deposit
a uniform amount in the bank annually. Find the amount in the bank at the
15th year if interest is 6% annually.
A. $546,758 B. $646,758 C. $746,758 D. $632,747
42. A man is applied for a loan of P100,000 and pays P10,000 annually from 1st
year to 9th year. Considering an interest rate of 10% per year, what amount
he has to pay at the 10th year in order to pay off the loan.
A. $100,000 B. $110,000 C. $120,000 D. $130,000