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FIN--5203-1D2-FA-2021 - Finance for

Engineers
Started on Saturday, October 30, 2021, 5:12 PM
State Finished
Completed on Saturday, October 30, 2021, 5:27 PM
Time taken 15 mins 36 secs
Grade 4.50 out of 25.00 (18%)
Question 1
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You plan to make a deposit of $10,000 into your investment account, and then
start withdrawing $2,000 from the account every year for 7 years. The account
is expected to provide a rate of return of 12% every year. At the end of 7 years
you will withdraw your remaining balance of $1,929 and close the account.
Which of the numbers given above represents variable A?

a.
$10,000

b.
$2,000

c.
7 years

d.
$1,929
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The correct answer is:

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 $2,000

Question 2
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A typical code of ethics for engineers would most likely mandate all of the
below, EXCEPT

a.
Engineers should only offer a payment or a gift in exchange for awarding a
contract by public authority if specifically authorized by the employer to do so.

b.
Engineers should not sign any documents without appropriate authority and
qualifications.

c.
Engineers should be fair and objective when preparing reports and
presentations.

d.
Engineers should not share project related information with non-employees
without prior approval from the client or the employer.
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Your answer is incorrect.
The correct answer is:
Engineers should only offer a payment or a gift in exchange for awarding a
contract by public authority if specifically authorized by the employer to do so.

Question 3
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 Question text
For a given positive interest rate, the money an investment accumulates over
time using compound interest is ________ if simple interest is used.

a.
smaller or the same as

b.
smaller than

c.
larger than

d.
the same as
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The correct answer is:
larger than

Question 4
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If it is found that a potential future project is more risky than previously thought

a.
the project should be rejected.

b.
the MARR used in the evaluation of the project should be increased.

c.
the MARR used in the evaluation of the project should be lowered.

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 d.
more capital should be requested to cushion the additional risk.
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The correct answer is:
the MARR used in the evaluation of the project should be increased.

Question 5
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A project that is expected to return less than the MARR

a.
should only be funded if there are no other, better projects avaialble.

b.
should not be funded.

c.
should only be funded if its cash inflows are greater than cash outflows.

d.
should be implemented more carefully than other projects.
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The correct answer is:
should not be funded.

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 Question text
Which of the interest rates below would make $100 today economically
equivalent to $125 in 1 year?

a.
25%

b.
10%

c.
75%

d.
80%
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The correct answer is:
25%

Question 7
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All of the following mean the same as Minimum Attractive Rate of Return except

a.
hurdle rate.

b.
benchmark rate.

c.
inflation rate.

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 d.
cutoff rate.
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The correct answer is:
inflation rate.

Question 8
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All of the below typically represent cash outflows, EXCEPT

a.
First cost.

b.
Taxes.

c.
Revenue.

d.
Operating expense.
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The correct answer is:
Revenue.

Question 9
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 Question text
You are loaning $10,000 to your friend for 1 year, and you are absolutely sure
your friend will pay you back. If you expect the inflation rate will be around 4%
next year, what is the interest rate you need to ask your friend to pay if you
want to get a real rate of return of 5% on the loan?

a.
20%

b.
1%

c.
12.5%

d.
9%
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The correct answer is:
9%

Question 10
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All of the following are examples of noneconomic factors except

a.
availability of resources.

b.
profit.

c.

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 customer acceptance.

d.
goodwill.
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The correct answer is:
profit.

Question 11
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GENERAL INSTRUCTIONS: ENTER YOUR ANSWER WITHOUT THE % SIGN, BUT
FORMATTED AS PERCENT WITH TWO DECIMAL PLACES, for instance if you
compute 0.03468 interest rate on your calculator then ENTER 3.47 AS YOUR
ANSWER. DO NOT ROUND IN YOUR CALCULATION STEPS (use calculator memory
functions) TO AVOID ROUNDING ERRORS. There is a little bit of tolerance built
into accepting/rejecting your answer, but if you round in your intermediate
calculations you may be too far off.
Note: Always assume compound interest throughout the course, unless
specifically instructed to work with simple interest.
Assume you borrowed $18000 from a bank. After 1 year you are asked to repay
$19452.6. What is the implied interest rate on this 1-year loan?

14.5
Answer:
Feedback
The interest rate is calculated as:
( (amount repaid) / (amount borrowed) ) - 1
or
( (amount repaid) - (amount borrowed) ) / (amount borrowed)
Thus, (19452.6/18000) - 1 = 0.0807
The correct answer is: 8.07

Question 12
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GENERAL INSTRUCTIONS: ENTER YOUR ANSWER WITHOUT THE $ SIGN AND
COMMA, BUT FORMATTED IN DOLLARS WITH TWO DECIMAL PLACES, for instance
if you compute $77,342.6478 then ENTER 77342.65 AS YOUR ANSWER. DO NOT
ROUND IN YOUR CALCULATION STEPS (use calculator memory functions) TO
AVOID ROUNDING ERRORS. There is a little bit of tolerance built into
accepting/rejecting your answer, but if you round in your intermediate
calculations you may be too far off.
Note: Always assume compound interest throughout the course, unless
specifically instructed to work with simple interest.
Assume you borrow $2000 from a bank, for 5 years. This means that on the day
the loan is created, in year 0, the balance that you owe is $2000. Further
assume you do not make any payments to the bank until year 5, and just let the
balance you owe accumulate, and the bank is charging you 2.62% annual
interest rate. How much of interest (in dollars) will be added to your overall
account balance, that you owe, at the end of year 3, for the interest that
accumulated during year 3?
28
Answer:
Feedback
We can find out the interest added during year 3 by taking the balance in the
account at the end of year 3, and subtracting the balance at the end of year 2.
( $2,000 x (1+0.0262)^3 ) - ( $2,000 x (1+0.0262)^2) = 2161.354609456 -
2106.17288 = 55.181729456
The correct answer is: 55.18
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