GO FURTHER

REVIEW SET-ENGINEERING ECONOMY

Simple Interest B. 38.51% D. 39.31%

1. A loan of P5,000 is made for a period of 15 months, at a 10. Mr. J. Dela Cruz borrowed money from the bank. He received
simple interest rate of 15%, what future amount is due at the from the bank P1,340.00 and promised to pay P1,500.00 at
end of the loan period? the end of 9 months. Determine the simple interest rate and
A. 5,937.50* C. 5,873.20 the corresponding discount rate or often referred to as the
B. 5,712.40 D. 5,690.12 “Banker’s Discount”.
A. 15.92% ; 13.73%* C. 12.95% ; 17.33%
2. Mr. Bacani borrowed money from the bank. He received B.18.28% ; 13.12% D. 19.25% ; 13.33%
from the bank P1,842 and promised to repay P2,000 at the
end of 10 months. Determine the rate of simple interest. Compound Interest
A. 12.19 % C. 12.03 %
B. 11.54 % D. 10.29 %* 11. What is the effective rate corresponding to 18%
compounded daily? Take 1 year is equal to 360 days.
3. The exact simple interest of P5,000 invested from June 21, A. 19.61 % C. 19.44 %
1995 to December 25, 1995 is P100. What is the rate of B. 19.31 % D. 19.72 %*
interest?
A. 3.90 %* C. 3.92 % 12. What rate of interest compounded annually is the same as
B. 3.95 % D. 3.98 % the rate of interest of 8% compounded quarterly?
A. 8.07 % C. 8.12 %
4. What is the ordinary interest on P1,500.50 for 182 days at B. 8.16 % D. 8.24 %*
5.2%?
A. P39.01 C. P39.82 13. Which of these gives the lowest effective rate of interest?
B. P39.45* D. P39.99 A. 12.35 % compounded annually
B. 11.90 % compounded annually
5. What is the interest due on a P 1500 note for 4 years and 3 C. 12.20 % compounded annually
months, if it bears 12% ordinary simple interest? D. 11.60 % compounded annually*
A. P 756* C. P 765
B. P 675 D. P 576 14. An amount of P1,000 becomes P1,608.44 after 4 years
compounded bimonthly. Find the nominal interest.
6. P4000 is borrowed for 75 days at 16% per annum simple A. 11.89 % C. 12.00 %*
interest. How much will be due at the end of 75 days? B. 12.08 % D. 12.32 %
A. P4186.43 C. P4133.33*
B. P5124.54 D. P5625.43 15. How long will it take money to double itself if invested at 5%
compounded annually?
Discount A. 13.7 years C. 14.7 years
B. 14.2 years* D. 15.3 years
7. A college freshman borrowed P2,000 from a bank for his
tuition fee and promised to pay the amount for one year. He 16. By the condition of a will, the sum of P20,000 is left to a girl
received only the amount of P1,920 after the bank collected to be held in trust fund by her guardian until it amounts to
the advance interest of P80.00. What was the rate of P50,000. When will the girl receive the money if fund
discount? invested at 8% compounded quarterly?
A. 3.67 % C. 4.00 %* A. 11.23 years C. 11.46 years
B. 4.15 % D. 4.25 % B. 11.57 years* D. 11.87 years

8. It is the practice of almost all banks in the Philippines that 17. Mandarin Bank advertises 9.5% account that yields 9.84%
when they grant a loan, the interest for one year is annually. Find how often the interest is compounded.
automatically deducted from the principal amount upon A. Monthly C. Bimonthly
release of money to a borrower. Let us therefore assume B. Quarterly* D. Annually
that you applied for a loan with a bank and the P80,000 was
approved at an interest rate of 14% of which P11,200 was 18. A student plans to deposit P1,500 in the bank now and
deducted and you were given a check of P68,800. Since you another P3,000 for the next 2 years. If he plans to withdraw
have to pay the amount of P80,000 one year after, what then P5,000 three years from after his last deposit for the purpose
will be the effective interest rate? of buying shoes, what will be the amount of money left in the
A. 16.02 % C. 16.28 %* bank after one year of his withdrawal? Effective annual
B. 16.32 % D. 16.47 % interest rate is 10%.
A. P1,549.64* C. P1,459.64
9. It is the practice of almost all bank in the Philippines that B. P1,345.98 D. P1,945.64
when they grant a loan, the interest for 1 year is
automatically deducted from the principal amount upon 19. The amount of P12800 in 4years at 5% compounded
release of money to a borrower. Let us therefore assume quarterly is _____.
that you applied for a loan with the bank and the P80000 was A. P14,785.34 C. P16,311.26
approved at an interest rate of 14% of which P11200 was B. P15,614.59 * D. P15,847.33
deducted and you were given ac check of P68800. Since you
have to pay the amount of P80000 one year after, what then F = P(1+r/m)^(mt) = 12,800(1+0.05/4)^16 =15,614
will be the effective interest rate?
A. 16.28%* C. 17.30%
20. A sum of P1,000 is invested now and left for 8 years, at which Ordinary annuity: P = A((1+i)^n-1)/(i*(1+i)^(n+m-1))
time the principal is withdrawn. The interest has an accrued P= 100*((1.08)^2-1)/(0.08*(1.08)^(2+3-1)) = 152.87
left for another 8 years. If the effective annual interest is 5%,
what will be the withdrawn amount at the end of the 16th
year?
A. P507.42 C. P750.42 30. What is the present worth of a P500 annuity starting at the
B. P705.42 * D. P425.07 end of the third year and continuing to the end of the fourth
year, if the annual interest rate is 10 %?
21. How long would it take your money to double itself if it is A. P 727.17 C. P 717.17*
invested at 6% simple interest, compounded semi-quarterly, B. P 714.71 D. P 731.17
and compounded continuously?
A. 12.67 yrs ; 11.2 yrs ; 15.05 yrs 31. What annuity is required over 12 years to equate with a
B. 18.67 yrs ; 11.6 yrs ; 11.24 yrs future amount of P 20,000? Assume i= 6% annually.
C. 16.67 yrs ; 11.6 yrs ; 11.55 yrs * A. P 1,290.34 C. P 1,185.54*
D. 17.67 yrs ; 10.2 yrs ; 11.45 yrs B. P 1,107.34 D. P 1,205.74

22. P 1000 is deposited in a bank at 7% interest. What is the 32. A factory operator bought a diesel generator set for P
value of the money after 25 years, assuming that nothing 10,000.00 and agreed to pay the dealer uniform sum at the
was deposited after the initial deposit? end of each year for 5 years at 8% interest compounded
A. P 5, 247.63 C. P 5, 437.34 annually, that the final payment will cancel the debt for
B. P 5, 427.43* D. P 5, 720.51 principal and interest. What is the annual payment?
A. P 2,500.57 C. P 2,544.45
23. A certain amount was deposited 5 years and 9 months ago at B. P 2,540.56 D. P 2,504.57*
an interest of 8% compounded quarterly. If the sum now is
P315,379.85, how much was the amount deposited? 33. What is the present worth of a year annuity paying P
A. P200,000 * C. P240,000 3,000.00 at the end of each year, with interest at 8%
B. P180,000 D. P260,000 compounded annually?
A. P 7,654.04 C. P 7,731.29*
Continuously Compounded B. P 7,420.89 D. P 7,590.12

24. Find the time required for a sum of money to triple itself at 34. A man loans P 187,400 from a bank with interest at 5%
5% per annum compounded continuously. compounded annually. He agrees to pay his obligations by
A. 21.97 years* C. 18.23 years paying 8 equal annual payments, the first being due at the
B. 25.34 years D. 23.36 years end of 10 years. Find the annual payments.
A. P 43,600.10 C. P 43,489.47
25. A man wishes to have P40,000 in a certain fund at the end of B. P 43,263.91 D. P 43,763.20*
8 years. How much should he invest in a fund that will pay
6% compounded continuously? 35. A person buys a piece of lot for P 100,000 downpayment and
A. P24,751.34 * C. P28,864.36 10 deferred semi-annual payments of P 8,000 each, starting
B. P36,421.44 D. P30,468.42 three years from now. What is the present value of the
investment if the rate of interest is 12% compounded semi-
26. American Express Corp. charges 1.5% interest per month, annually?
compounded continuously on the unpaid balance purchases A. P 142,999.08 C. P 143,104.89
made on this credit card. Compute the effective rate of B. P 142,189.67 D. P 143,999.08*
interest.
I eff = e^r – 1 = e^0.0 36. A young engineer borrowed P 10,000 at 12% interest and
A. 19.72%* C. 21.20% paid P 2,000 per annum for the last 4 years. What does he
B. 20.25% D. 19.90% have to pay at the end of the fifth year in order to pay off his
loan?
r = 0.015*12 = 0.18 A. P 6,999.39 C. P 6,292.93
i eff = e^r – 1 = e^0.18 – 1 = 0.1972 B. P 6,222.39 D. P 6,922.93*

27. Compute the difference in the future amount of P500 37. Miss Calledo deposited P 1,000, P 1,500 and P 2,000 at the
compounded annually at nominal rate of 5% and if it is end of the 2nd year, 3rd year and 4th year, respectively in a
compounded continuously for 5 years at the same rate. savings account which earned 10% per annum. How much is
A. P3.87* C. P5.48 in the account at the end of the 4th year?
B. P4.21 D. P6.25 A. P 4,880.00 C. P 4,820.00
B. P 4,860.00* D. P 4,840.00
28. If the nominal interest rate is 3%, how much is P5000 worth
in 10 years in a continuously compounded account? 38. Annuity is required over 10 years to equate to a future
A. P5750 C. P7500 amount of P 15, 000 with i=5%
B. P6750 * D. P6350 A. P 1, 192.57* C. P 1, 912.75
B. P 1, 219.60 D. P 1, 921.65
Annuity
39. A debt of P 1000 is to be paid off in 5 equal yearly payments,
29. What is the present worth of two P 100 payments at the end each combining an amortization installment and interest at
of the third year and fourth year? The annual interest rate is 4% on the previously unpaid balance of the debt. What
8%. n = 2, m = 3 should be the amount of each payment?
A. P 150.56 C. P 152.88* A. P 220.50 C. P 224.62*
B. P 153.89 D. P 151.09 B. P 242.61 D. P 222.50

Ordinary annuity: P = A((1+i)^n-1)/(i*(1+i)^n)

40. A company sets aside P 300,000 each year as a fund for amortization expense at the end of the first year, December
expansion. If the fund earns 9% compounded annually, 31, will be
determine how long will it take before a building costing P 3, A. $10,000, using the straight-line method
000, 000 can be built? B. $22,500, using the double declining-balance method
A. 7.34 years C. 7.44 years* C. $7,000, using the straight-line method
B. 7.20 years D. 7.54 years D. $11,250, using the double declining-balance method*

Gradient 50. ABC Corporation makes it a policy that for any new
equipment purchased, the annual depreciation cost should
41. The Texas Highway Department expects the cost of not exceed 20% of the first cost at any time with no salvage
maintenance for a particular piece of heavy equipment to be value. Determine the length of service life necessary if the
$5000 in year 1, $5,500 in year 2, and amounts increasing by depreciation used is the SYD method.
$500 through year 10. At an interest rate of 10% per year, A. 7 eyars C. 8 years
the present worth of the maintenance cost is nearest to: B. 9 years* D. 10 years
A. $38,220 C. $42,170*
B. $46,660 D. $51,790 51. An asset is purchased for P 9,000.00. Its estimated economic
\ life is 10 years after which it will be sold for P 1,000.00. Find
the depreciation in the first three years using sum-of-years
digit method
42. The cash flow associated with a strip mining operation is A. P 3,279.27 C. P 3,927.27*
expected to be $200,000 in year 1, $180,000 in year 2, and B. P 3,729.27 D. P 3,792.72
amounts decreasing by $20,000 per year through 8. At an
interest rate of 12% per year, the equivalent annual cash 52. The equipment bought at a price of Php 450,000 has an
flow is nearest to: economic life of 5 years and a salvage value of Php 50, 000.
A. $61,970 C. $142,738* The cost of money is 12% per year. Compute the first year
B. $185,070 D. $261,970 depreciation using Declining Balance Method.
A. 174,300 C. 143,800
43. A mechanical contractor is trying to calculate the present B. 160,200* D. 120,500
worth of personnel salaries over the next five years. He has
four employees whose combined salaries thru the end of this 53. A machine costs Php 300,000 with a salvage value of Php
year are $150,000. If he expects to give each employee a 50,000 at the end of its life of 10 years. If money is worth 6%
raise of 5% each year, the present worth of his employees' annually, use Sinking Fund Method and determine the
salaries at an interest rate of 12% per year is nearest to: depreciation at the 6th year.
A. $591,000* C. $816,100 A. 12687 C. 18967*
B. $702,900 D. $429,300 B. 15385 D. 23587

44. Suppose that the maintenance for a piece of equipment Break Even
costs $300 and increases by 15% every year for 5 years. The
value of money is 9%. What is the equivalent present cost 54. A manufacturer produces certain items at a labor cost of P
over the time horizon? 115 each, material cost of P 76 each and variable cost of P
A. $2022.71 C. $1175.16 2.32 each. If the item has a unit price of P 600, how many
B. $1536.22* D. $1166.90 units must be manufactured each month for the
manufacturer to break even if the monthly overhead is
Depreciation P428,000
A. 1,033 C. 1,037
45. A machine costs of P 8,000 and an estimated life of 10 years B. 1,043 D. 1,053*
with a salvage value of P 500. What is its book value after 8
years using straight line method? 55. A leading shoe manufacturer produces a pair of Lebron
A. P 2,000.00* C. P 2,100.00 James signature shoes at a labor cost of P 900.00 a pair and a
B. P 2,200.00 D. P 2,300.00 material cost of P 800.00 a pair. The fixed charges on the
business are P 5,000,000 a month and the variable costs are
46. ABC Company provides the following information: Cost of P 400.00 a pair. Royalty to Lebron James is P 1,000 per pair of
equipment = $5000, Salvage value = $500, Life = 10 years. shoes sold. If the shoes sell at P 5,000 a pair, how many pairs
Using straight line method, the yearly depreciation charge is must be produced each month for the manufacturer to
A. $500 C. $550 break-even?
B. $50 D. $450* A. 2.590 C. 2,632*
B. 2,712 D. 2,890
47. Annual depreciation of machine is 40000, cost of machine is
500000, rate of depreciation according to straight-line
method will be-
A. 9% C. 18%
B. 16% D. 8%*

48. A VOM has a selling price of P 400. If its selling price is

expected to decline at a rate of 10% per annum due to
obsolescence, what will be its selling price after 5 years?
A. P 222.67 C. P 212.90
B. P 236.20* D. P 231.56

49. An asset having a four-year service life and a salvage value of

$5,000 was acquired for $45,000 cash on June 28. The