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Republic of the Philippines

BATANGAS STATE UNIVERSITY


Pablo Borbon Main II
Batangas City

COLLEGE OF ENGINEERING, ARCHITECTURE & FINE ARTS

ACTIVITY GUIDE

Project Title: Time Value of Money


Name: Mercado, Charlie Ercole B.
Section: CE - 3101

Learning Outcome:
▪ Solve Engineering Economics applications.

Objective:
The specific goal for this exercise is:
▪ to solve Engineering Economics problems related to interest and annuity.

Activity Task:
Analyze and answer the given problem. Show your complete solution to the problem.

Problem:

1. You loan from a bank the amount of P100,000 with a rate of simple interest of 20% but the interest
was deducted from the loan at the time the money was borrowed. If at the end of 1 year, you have to
pay the full amount of P100,000, what is the actual rate of interest?
2. Mr. Dee Jay borrowed money from the bank and he received the amount of P18,420 and promised to
repay P20,000 at the end of 10 months. Determine the rate of simple interest.
3. Assume you put $10,000 into a bank account. How much will your investment be worth after 10
years at an annual interest rate of 5% compounded monthly?
4. Find the nominal rate compounded monthly which is equivalent to 16% compounded quarterly. What
is the corresponding effective rate?
5. Mr. Reyes borrows P600,000 at 12% compounded annually, agreeing to repay the loan in 15 equal
payment. What is the value of equal payment and the accumulated amount?
6. If P25,000 is deposited now into a savings account that earns 6% per year, what uniform amount
could be withdrawn at the end of each year for 10 years so that nothing would be left on the account
after 10th withdrawal.
7. A man invests P50,000 now for the college education of his son. If the fund earns 14% effective, how
much will the son get each year starting from his 17th to 22nd birthday?

1 of 4 | Engineering Economics
𝑵𝒖𝒎𝒃𝒆𝒓 𝟏
𝑃 = 𝑃80,000
𝐼 = 𝑃100,000 − 𝑃80,000
𝐼 = 𝑃20,000
360
𝑛=
360
𝑛=1
𝑰 = 𝑷𝒊𝒏
𝑰
𝒊=
𝑷𝒏
𝑃20,000
𝑖=
𝑃80,000𝑥1
𝑖 = 0.25
𝑖 = 25%

𝑵𝒖𝒎𝒃𝒆𝒓 𝟐
𝑃 = 𝑃18,420
𝐼 = 𝑃20,000 − 𝑃18,420
𝐼 = 𝑃1580
10𝑥30
𝑛=
360
2
𝑛=
3
𝑰 = 𝑷𝒊𝒏
𝑰
𝒊=
𝑷𝒏
𝑃1580
𝑖=
5
𝑃18420𝑥 6
𝑖 = 0.1029315961
𝑖 = 10.29%

𝑵𝒖𝒎𝒃𝒆𝒓 𝟑
𝑃 = 𝑃18,420
𝐼 = 𝑃20,000 − 𝑃18,420
𝐼 = 𝑃1580
8𝑥30
𝑛=
360
2
𝑛=
3
𝑭 = 𝑷(𝟏 + 𝒊)^𝒏
𝟎𝟓 10(20)
𝑭 = $𝟏𝟎, 𝟎𝟎𝟎 (𝟏 + 𝟎. )
𝟏𝟐
𝐹 = $16470.09498
𝐹 = $16470.00

2 of 4 | Engineering Economics
𝑵𝒖𝒎𝒃𝒆𝒓 𝟒

𝑟 12 𝐹 𝑟 12
F = 𝑃 (1 + 12) → 𝑃 = (1 + 12)
0.16 4 𝐹 0.16 4
F = 𝑃 (1 + 4 ) → 𝑃 = (1 + )
4
𝒆𝒒𝒖𝒂𝒕𝒊𝒏𝒈
0.16 4 𝑟 12
(1 + ) = (1 + )
4 12
𝑟 12
1.16985856 = (1 + )
12
1 𝑟
(1.16985856)12 = 1 +
12
1
r = 12 [(1.16985856)12 − 1]
r = 0.157913 or 15.79%
0.16 4
Eri = (1 + ) −1
4
𝐸𝑟𝑖 = 0.16985856 𝑜𝑟 16.99%

𝑵𝒖𝒎𝒃𝒆𝒓 𝟓
𝑃 = 𝑃600,000
𝑖 = 12%
𝑛 = 15
1−(1+𝑖)−𝑛
𝑈𝑠𝑖𝑛𝑔 𝑃 = 𝐴 [ ]→ 𝐴 =
𝑖
𝑃𝑖
[1−(1+𝑖)−𝑛]
𝑃600,000𝑥0.12
𝐴=[ ]
1 − (1.12)−15
𝐴 = 𝑃88,094.54379

𝑵𝒖𝒎𝒃𝒆𝒓 𝟔
𝑃 = 𝑃25,000
𝑖 = 6%
𝑛 = 10
1−(1+𝑖)−𝑛
𝑈𝑠𝑖𝑛𝑔 𝑃 = 𝐴 [ ]→ 𝐴 =
𝑖
𝑃𝑖
[1−(1+𝑖)−𝑛]
𝑃25,000𝑥0.06
𝐴=[ ]
1 − (1.06)−10

3 of 4 | Engineering Economics
𝑵𝒖𝒎𝒃𝒆𝒓 𝟕
𝑃 = 𝑃50,000
𝑖 = 14%
𝑛 = 17𝑡ℎ − 22𝑛𝑑 = 6
𝑚 = 16

1−(1+𝑖)−𝑛 𝑃𝑖 1
𝑈𝑠𝑖𝑛𝑔 𝑃 = 𝐴 [ ] (1 + 𝑖)−𝑚 → 𝐴 = [1−(1+𝑖)−𝑛 ] [(1+𝑖)−𝑚 ]
𝑖
𝑃50000𝑥0.14 1
𝐴=[ ] [ ]
1 − (1.14)−6 (1.14)−16
𝐴 = 𝑃104,627.7325

4 of 4 | Engineering Economics