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Engineering Economics Board Exam Reviewer 1
Civil Engineering (De La Salle University – Dasmariñas)
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ENGINEERING ECONOMICS
Assignment No. 1
Submitted by:
Dalida, Hezelle Anne
De Guzman, Jhon Rhey
Galicia, Joshua
Mapilis, Mark Ivan
Reyes, Emmanuel Joshua
Tolentino, Dianna Rose
Submitted to:
Prof. Roland Viray
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1. A man wishes to accumulate 3722P after 5 years, 8 months and 28 days.
How much should be deposited by the man in a bank if the ordinary
simple interest is 15% per annum?
Solution: 𝐹 = 𝑃 ( 1 + 𝑖𝑛 )
𝐹
𝑃=
(1+𝑖𝑛)
Where:
F = 3,722P
i = 15% = 0.15
n = ???
P = ???
Solving for n:
1 𝑦𝑒𝑎𝑟 1 𝑦𝑒𝑎𝑟
𝑛 = 5 𝑦𝑒𝑎𝑟𝑠 + (8 𝑚𝑜𝑛𝑡ℎ𝑠) + (28 𝑑𝑎𝑦𝑠)
12 𝑚𝑜𝑛𝑡ℎ𝑠 360 𝑑𝑎𝑦𝑠
𝑛 = 5.74 𝑦𝑒𝑎𝑟𝑠
Solving for P:
𝐹 3722
𝑃 = (1+𝑖𝑛) = = 2000
1+(0.15)(5.74)
𝑷 = 𝟐, 𝟎𝟎𝟎𝑷
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2. A man deposited 2000P in a bank at the rate of 15% per annum from
March 21,1996 to October 25,1997. Find the exact simple interest.
Solution: 𝐼 = 𝑃𝑖𝑛
Where:
P = 2000P
I = 15% per year = 0.15
n = ???
Solving for n:
March 21-31 10 January 1997 31
April 1996 30 February 28
May 1996 31 1997
June 1996 30 March 1997 31
July 1996 31 April 1997 30
August 1996 31 May 1997 31
September 30 June 1997 30
1996 July 1997 31
October 31 August 1997 31
1996 September 30
November 31 1997
1996 October 1-25 25
December 30
1996
Total: 583 days
583
𝑛= = 1.597 ≈ 1.6 𝑦𝑒𝑎𝑟
365
Solving for I:
𝐼 = 2000 (0.15)(1.6)
𝑰 = 𝟒𝟖𝟎 𝑷
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3. A bank charges 1.5% per month on a loan. Find the equivalent nominal
rate of interest.
𝑗
Solution: 𝑖 =
𝑛
Where:
i = 1.5%
n = per month, 12
Solving for i:
𝑗
1.5% =
12
𝒋 = 𝟏𝟖% 𝒄𝒐𝒎𝒑𝒐𝒖𝒏𝒅𝒆𝒅 𝒎𝒐𝒏𝒕𝒉𝒍𝒚
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4. A financing company charges 1.5% per month on a loan. Find the
equivalent effective rate of interest.
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5. A nominal rate of 12% compounded monthly is equal to an effective rate
of ____.
Solution: 𝑖𝑒 = (1 + 𝑖)𝑛1 − 1
Where:
𝑗 = 12% 𝑝𝑒𝑟 𝑚𝑜𝑛𝑡ℎ
𝑛𝑖 = 12
𝑖 =?
Solving for i:
𝑗
𝑖=
𝑛
.12
𝑖=
12
𝑖 = 0.01
Solving for ie:
𝑖𝑒 = (1 + 0.01)12 − 1
𝑖 = 0.1268
𝒊𝒆 = 𝟏𝟐. 𝟔𝟖% 𝒑𝒆𝒓 𝒚𝒆𝒂𝒓
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6. Convert 16% compounded semi-annually to equivalent nominal rate
which is compounded daily.
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7. Find the accumulated amount of 1000P after 5 years when deposited in
a bank at a rate of 16% compounded monthly.
𝑗
Solution: 𝑖 =
𝑛1
𝐹 = 𝑃 ( 1 + 𝑖 )𝑛
Where:
j = 16%
n1 = 12
P = 1,000P
n = 5 years = 60 months
i = ???
F = ???
Solving for i:
𝑗 16%
𝑖= = = 1.33% = 0.0133
𝑛1 12
Solving for F:
𝐹 = 𝑃 ( 1 + 𝑖 )𝑛
𝐹 = 1000 ( 1 + 0.0133 )60
𝑭 = 𝟐, 𝟐𝟎𝟗. 𝟒𝟒𝑷
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8. How long in years will a certain sum of money to triple its amount when
deposited at a rate of 12% compounded annually?
Solution: F = P (1 + i)n
Where:
F = 3P
i = 12% = 0.12 (compounded annually)
Solving for n:
3P = P (1 + 0. 12)n
3P P (1 + 0. 12)n
=
P P
3 = (1 + 0.12)𝑛
ln (3)
𝑛=
ln (1 + 0.12)
𝒏 = 𝟗. 𝟕 𝒚𝒆𝒂𝒓𝒔
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9. How much should be deposited in a bank at a rate of 12% compounded
continuously for 5 yrs if its accumulated amount is 9110.60P?
Solution: F = Pejn
Where:
j= 12%, 0.12
F= 9110.60P
n=5
Solving for P:
F = Pejn
9110.60 𝑃𝑒 (0.12)(5)
= (0.12)(5)
𝑒 (0.12)(5) 𝑒
𝑷 = 𝟓𝟎𝟎𝟎𝑷
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10. An effective rate of interest, which is 12.75%, is equivalent to
what percent if compounded continuously.
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11. How much is expected to be received by a man that makes a loan
of 851.06P, which is payable at once, if the bank gave him a discount of
6%.
Solution:
𝐷 = 𝐹𝑑
P = F-D
Where:
𝑑 = 0.06
𝐹 = 851.06𝑃
Solving for D:
D = 851.06P x 0.06
D = 51.06
Solving for P:
P = 851.06P - 51.06P
P = 800.00P
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12. Find the cash price of a generator which was bought in installment
basis that requires a down payment of 50,000P and payment of 30,000P
after 1 year, 40,000P after 2 years and a final payment of 76,374.34P after
4 years at a rate of 15% per annum.
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13. A man made a loan of 100,000P at a rate of 15% per annum and
promise to pay it according to the following manner, 30,000P at the end
of 1st yr, unknown payment at the end of 2nd yr and a final payment of
76,374.38P at the end of 4th yr. Find the unknown payment made by the
man.
100,000P
i = 15% per year
76,374.38P
Unknown = P
30,000P
Solving for P:
100,000 = 76,374.38 (1.15)−4 + P (1.15)−2 + 30,000 (1.15)−1
P (1.15)−2 100,000 − 76,374.38 (1.15)−4 − 30,000 (1.15)−1
=
(1.15)−2 (1.15)−2
100,000 − 76,374.38 (1.15)−4 − 30,000 (1.15)−1
𝑃=
(1.15)−2
𝑃 = 39,999.99622P
𝑷 = 𝟒𝟎, 𝟎𝟎𝟎𝑷
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14. Find the present worth of the following payments, 5000P after 1
year, 4000P after 2 years, 8000P after 4 years at a rate of 12% per annum.
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15. Find the amount of the following payments at the end of 5th yr,
3000P at the end of 1st yr, 4500P at the end of 2nd yr and 6000P at the
end of 4th yr if money worth 12% per annum.
Solution: F = P(1+i)n
Where:
5th yr=?
3000P=1st yr
4500P= 2nd yr
6000P=4th yr
Solving for P:
5th yr= 3000(1+0.12)4 + 4500(1+0.12)3 + 6000(1+0.12)1
5th yr = 17762.73
5th yr = 17763P
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16. How many yrs will it take for a certain sum of money to triple its
amount when deposited at a rate of 12% compounded continuously?
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17. A bank is advertising 9.5% accounts that yield 9.84% annually.
How often is the interest compounded?
Solution:
𝑗 𝑛
𝑖𝑒 = (1 + ) 1 −1
𝑛1
Where:
𝑗 = 9.5% 𝑐𝑜𝑚𝑝𝑜𝑢𝑛𝑑𝑒𝑑 𝑛 =?
𝑖𝑒 = 9.84%
By ES, Shift solving for ie:
0.095 𝑛
0.0984 = (1 + ) 1 −1
𝑛1
𝑛1 = 3.88 ≈ 4
Therefore:
𝟗. 𝟓% 𝒊𝒔 𝒄𝒐𝒎𝒑𝒐𝒖𝒏𝒅𝒆𝒅 𝒒𝒖𝒂𝒓𝒕𝒆𝒓𝒍𝒚
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18. A man borrows 2000P for 6 years at 8%. At the end of 6 years, he
renews the loan for the amount due plus 2000P more for two years at
8%. What is the lump sum due?
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19. You deposit 1000P into a 9% account today. At the end of two
years, you will deposit another 3000P. In five years, you plan a 4000P
purchase. How much is left in the account one year after the purchase?
Solution: 𝐹 = 𝑃 ( 1 + 𝑖 )𝑛
Where:
P1 = 1,000P
i = 9% = 0.09
n1 = 2 years
P2 = 3,000P
n2 = 5 years
P3 = 4,000P
n3 = 1 year
F = ???
Solving for F:
𝐹 = 𝑃 ( 1 + 𝑖 )𝑛
𝐹 = 1000 ( 1 + 0.09)1
𝐹 = 1188.1
𝑃 = 1188.1 + 𝑃2
𝑃 = 1188.1 + 3000
𝑃 = 4188.1
𝐹 = 4188.1 ( 1 + 0.09)5
𝐹 = 6443.91
𝑃 = 6443.91 − 𝑃3
𝑃 = 6443.91 − 4000
𝑃 = 2443.91
𝐹 = 2443.91 ( 1 + 0.09)1
𝑭 = 𝟐, 𝟔𝟔𝟑. 𝟖𝟔𝑷
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20. Consider a business which involves the investment of 100,000P
now and 100,000P at the end of one year. Revenue of 150,000P will be
generated at the end of years 1 and 2. What is the net present value of this
business if the effective annual interest rate is 10%?
𝐹1 𝐹2
Solution: 𝑁𝑃𝑉 = + −𝑃
1+𝑖 (1+𝑖)2
Where: F1 = 150,000P
F2 = 150,000P
i = 10% = 0.10
P = 200,000P (100,000P + 100,000P)
Solving for NPV:
𝐹1 𝐹2
𝑁𝑃𝑉 = + −𝑃
1+𝑖 (1+𝑖)2
150000 150000
𝑁𝑃𝑉 = + − 200000
1+0.10 (1+0.10)2
𝑵𝑷𝑽 = 𝟔𝟎, 𝟑𝟑𝟎. 𝟓𝟖𝑷
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