ENGINEERING ECONOMICS REVIEW of one year, she has to pay the full amount of

Lecturer: Engr. Mon Solante P100,000, what is the actual rate of interest?
A. 23.5 %
Choose the letter of the best answer in each B. 24.7 %
questions. C. 25.0 %
D. 25.8 %
1. First Benchmark Publishing’s gross margin is 50% 6. A loan of P5,000 is made for a period of 15
of sales. The operating costs of the publishing are months, at a simple interest rate of 15%, what
estimated at 15% of sales. If the company is future amount is due at the end of the loan
within the 40% tax bracket, determine the period?
percent of sales is their profit after taxes? A. 5,937.50
A. 21 % B. 5,873.20
B. 20 % C. 5,712.40
C. 19 % D. 5,690.12
D. 18 % 7. Mr. Bacani borrowed money from the bank. He
2. A farmer selling eggs at 50 pesos a dozen gains received from the bank P1,842 and promised to
20%. If he sells the eggs at the same price after repay P2,000 at the end of 10 months. Determine
the costs of the eggs rises by 12.5%, how much the rate of simple interest.
will be his new gain in percent? A. 12.19 %
A. 6.89 % B. 12.03 %
B. 6.65 % C. 11.54 %
C. 6.58 % D. 10.29 %
D. 6.12 % 8. A college freshman borrowed P2,000 from a
3. A feasibility study shows that a fixed capital bank for his tuition fee and promised to pay the
investment of P10,000,000 is required for a amount for one year. He received only the
proposed construction firm and an estimated amount of P1,920 after the bank collected the
working capital of P2,000,000. Annual advance interest of P80.00. What was the rate of
depreciation is estimated to be10% of the fixed discount?
capital investment. Determine the rate of return A. 3.67 %
on the total investment if the annual profit is B. 4.00 %
P3,500,000. C. 4.15 %
A. 28.33 % D. 4.25 %
B. 29.17 % 9. It is the practice of almost all banks in the
C. 30.12 % Philippines that when they grant a loan, the
D. 30.78 % interest for one year is automatically deducted
4. The monthly demand for ice cans being from the principal amount upon release of
manufactured by Mr. Camus is 3200 pieces. With money to a borrower. Let us therefore assume
a manual operated guillotine, the unit cutting that you applied for a loan with a bank and the
cost is P25.00. An electrically operated hydraulic P80,000 was approved at an interest rate of 14%
guillotine was offered to Mr. Camus at a price of of which P11,200 was deducted and you were
P275,000.00 and which cuts by 30% the unit given a check of P68,800. Since you have to pay
cutting cost. Disregarding the cost of money, the amount of P80,000 one year after, what then
how many months will Mr. Camus be able to will be the effective interest rate
recover the cost of the machine if he decides to A. 16.02 %
buy now? B. 16.28 %
A. 10 months C. 16.32 %
B. 11 months D. 16.47 %
C. 12 months 10. A man invested P110,000 for 31 days. The net
D. 13 months interest after deducting 20% withholding tax is
5. Engr. Trinidad loans from a loan firm an amount P890.36. Find the rate of return annually.
of P100,000 with a rate of simple interest of 20% A. 11.50 %
but the interest was deducted from the loan at B. 11.75 %
the time the money was borrowed. If at the end C. 11.95 %
D. 12.32 %
11. A investor wishes to earn 7% on his capital B. 19.44 %
after payment of taxes. If the income from an C. 19.31 %
available investment will be taxed at an average D. 19.72 %
rate of 42%, what minimum rate of return, before 18. What rate of interest compounded annually is
payment of taxes, must the investment offer to the same as the rate of interest of 8%
be justified? compounded quarterly?
A. 12.07 % A. 8.07 %
B. 12.34 % B. 8.12 %
C. 12.67 % C. 8.16 %
D. 12.87 % D. 8.24 %
12. Mr. Jun Ramos was granted a loan of P20,000 19. Which of these gives the lowest effective rate
by his employer Excel First Review and Training of interest?
Center, Inc. with an interest of 6% for 180 days on A. 12.35 % compounded annually
the principal collected in advance. The B. 11.90 % compounded annually
corporation would accept a promissory note for C. 12.20 % compounded annually
P20,000 non-interest for 180 days. If discounted at D. 11.60 % compounded annually
once, find the proceeds of the note. 20. An amount of P1,000 becomes P1,608.44 after
A. P18,000 4 years compounded bimonthly. Find the
B. P18,900 nominal interest.
C. P19,000 A. 11.89 %
D. P19,100 B. 12.00 %
13. Miss Evilla borrowed money from a bank. She C. 12.08 %
receives from the bank P1,340.00 and promised D. 12.32 %
to pay P1,500.00 at the end of 9 months. 21. How long will it take money to double itself if
Determine the corresponding discount rate or invested at 5% compounded annually?
often referred to as the “banker’s discount”. A. 13.7 years
A. 13.15 % B. 14.7 years
B. 13.32 % C. 14.2 years
C. 13.46 % D. 15.3 years
D. 13.73 % 22. By the condition of a will, the sum of P20,000 is
14. The exact simple interest of P5,000 invested left to a girl to be held in trust fund by her
from June 21, 1995 to December 25, 1995 is P100. guardian until it amounts to P50,000. When will
What is the rate of interest? the girl receive the money if fund invested at 8%
A. 3.90 % compounded quarterly?
B. 3.92 % A. 11.23 years
C. 3.95 % B. 11.46 years
D. 3.98 % C. 11.57 years
15. What is the ordinary interest on P1,500.50 for D. 11.87 years
182 days at 5.2%? 23. A sum of P1,000 is invested now and left for
A. P39.01 eight years, at which time the principal is
B. P39.82 withdrawn. The interest has accrued is left for
C. P39.45 another eight years. If the effective annual
D. P39.99 interest rate is 5%, what will be the withdrawal
16. A loan for P50,000 is to be paid in 3 years at amount at the end of the 16th year?
the amount of P65,000. What is the effective rate A. P693.12
of money? B. P700.12
A. 9.01 % C. P702.15
B. 9.14 % D. P705.42
C. 9.31 % 24. Mandarin Bank advertises 9.5% account that
D. 9.41 % yields 9.84% annually. Find how often the interest
17. What is the effective rate corresponding to is compounded.
18% compounded daily? Take 1 year is equal to A. Monthly
360 days. B. Bimonthly
A. 19.61 % C. Quarterly
D. Annually By how much is proposal B more economical
25. A student plans to deposit P1,500 in the bank than proposal A if interest rate is 20% and
now and another P3,000 for the next 2 years. If he depreciation to be neglected?
plans to withdraw P5,000 three years from after A. P 19,122.15
his last deposit for the purpose of buying shoes, B. P 19,423.69
what will be the amount of money left in the C. P 19,518.03
bank after one year of his withdrawal? Effective D. P 19,624.49
annual interest rate is 10%. 31. What is the present worth of a P500 annuity
A. P1,549.64 starting at the end of the third year and
B. P1,459.64 continuing to the end of the fourth year, if the
C. P1,345.98 annual interest rate is 10 %?
D. P1,945.64 A. P 727.17
26. You borrow P3,500.00 for one year from a B. P 717.17
friend at an interest rate of 1.5% per month C. P 714.71
instead of taking a loan from a bank at a rate of D. P 731.17
18% per year. How much lesser you will pay by 32. What annuity is required over 12 years to
borrowing the money from the bank? equate with a future amount of P 20,000?
A. P 62.44 Assume i= 6% annually.
B. P44.55 A. P 1,290.34
C. P54.66 B. P 1,185.54
D. P37.56 C. P 1,107.34
27. What is the present worth of two P 100 D. P 1,205.74
payments at the end of the third year and fourth 33. A factory operator bought a diesel generator
year? The annual interest rate is 8%. set for P 10,000.00 and agreed to pay the dealer
A. P 150.56 uniform sum at the end of each year for 5 years
B. P 152.88 at 8% interest compounded annually, that the
C. P 153.89 final payment will cancel the debt for principal
D. P 151.09 and interest. What is the annual payment?
28. A firm borrows P2,000 for 6 years at 8%. At the A. P 2,500.57
end of 6 years, it renews the loan for the amount B. P 2,544.45
due plus P2,000 more for 2 years at 8%. What is C. P 2,540.56
the lump sum due? D. P 2,504.57
A. P 3,260.34 34. What is the present worth of a year annuity
B. P 3,280.34 paying P 3,000.00 at the end of each year, with
C. P 3,270.34 interest at 8% compounded annually?
D. P 3,250.34 A. P 7,654.04
29. In year zero, you invest P 10,000.00 in a 15% B. P 7,731.29
security for 5 years. During that time, the average C. P 7,420.89
annual inflation is 6%. How much in terms of year D. P 7,590.12
zero pesos will be in the account at maturity? 35. A man loans P 187,400 from a bank with
A. P 15,030.03 interest at 5% compounded annually. He agrees
B. P 20,113.57 to pay his obligations by paying 8 equal annual
C. P 18,289.05 payments, the first being due at the end of 10
D. P 16,892.34 years. Find the annual payments.
30. The institute of Integrated Electrical Engineers A. P 43,600.10
of the Philippines (IIEE) is planning to put up its B. P 43,489.47
own building. Two proposals being considered C. P 43,263.91
are: D. P 43,763.20
A. The construction of the building now to cost P 36. A person buys a piece of lot for P 100,000
400,000 downpayment and 10 deferred semi-annual
B. The construction of a smaller building now to payments of P 8,000 each, starting three years
cost P300,000 and at the end of 5 years, an from now. What is the present value of the
extension to be added to cost P 200,000. investment if the rate of interest is 12%
compounded semi-annually?
 43. ABC Corporation makes it a policy that for
A. P 142,999.08 any new equipment purchased, the annual
B. P 143,104.89 depreciation cost should not exceed 20% of the
C. P 142,189.67 first cost at any time with no salvage value.
D. P 143,999.08 Determine the length of service life necessary if
37. A young engineer borrowed P 10,000 at 12% the depreciation used is the SYD method.
interest and paid P 2,000 per annum for the last 4 A. 7 eyars
years. What does he have to pay at the end of B. 8 years
the fifth year in order to pay off his loan? C. 9 years
A. P 6,999.39 D. 10 years
B. P 6,292.93 44. An asset is purchased for P 9,000.00. Its
C. P 6,222.39 estimated economic life is 10 years after which it
D. P 6,922.93 will be sold for P 1,000.00. Find the depreciation in
38. Miss Calledo deposited P 1,000, P 1,500 and P the first three years using sum-of-years digit
2,000 at the end of the 2nd year, 3rd year and method
4th year, respectively in a savings account which A. P 3,279.27
earned 10% per annum. How much is in the B. P 3,927.27
account at the end of the 4th year? C. P 3,729.27
A. P 4,880.00 D. P 3,792.72
B. P 4,820.00 45. Shell Philippines, a multinational company,
C. P 4,860.00 has a total gross income for a particular year of P
D. P 4,840.00 50,000,000. The taxable income after taking all
39. A P 1,000,000 issue of 3%, 15-year bond was deductions except for depletion is P 18,500,000.
sold at 95%. What is the rate of interest of this What is the allowable depletion allowance for
investment? that particular year? Take percentage of gross
A. 3.0% income for oil as 22%.
B. 3.4% A. P 9,358.41
C. 3.7% B. P 9,228.45
D. 4.0% C. P 9,250.00
40. A P 1, 000, 6% bond pays dividend D. P 9,308.45
semiannually and will be redeemed at 110% on 46. The Saudi Arabian Oil Refinery developed an
June 21, 204. It is bought on June 21, 2001 to yield oil well which is estimated to contain 5,000,000
4% interest. Find the price of the bond. barrels of oil at an initial cost of $ 50,000,000.
A. P 1,122.70 What is the depletion charge during the year
B. P 1,144.81 where it produces half million barrels of oil? Use
C. P 1,133.78 Unit or Factor method in computing depletion.
D. P 1,155.06 A. $ 5,000,000.00
41. A VOM has a selling price of P 400. If its selling B. $ 5,010,000.00
price is expected to decline at a rate of 10% per C. $ 5,025,000.00
annum due to obsolescence, what will be its D. $ 5,050,000.00
selling price after 5 years? 47. A manufacturer produces certain items at a
A. P 222.67 labor cost of P 115 each, material cost of P 76
B. P 212.90 each and variable cost of P 2.32 each. If the item
C. P 236.20 has a unit price of P 600, how many units must be
D. P 231.56 manufactured each month for the manufacturer
42. A machine costs of P 8,000 and an estimated to break even if the monthly overhead is
life of 10 years with a salvage value of P 500. P428,000
What is its book value after 8 years using straight A. 1,033
line method? B. 1,037
A. P 2,000.00 C. 1,043
B. P 2,100.00 D. 1,053
C. P 2,200.00 48. A manufacturing firm maintains one product
D. P 2,300.00 assembly line to produce signal generators.
Weekly demand for the generators is 35 units. The
line operates for 7 hours per day, 5 days per B. Goods
week. What is the maximum production time per C. Commodities
unit in hours required of the line to meet the D. Goods or commodities
demand? 54. What is defined as any tangible economic
A. 1.0 hour per unit activity that contributes directly or indirectly to
B. 1.2 hours per unit the satisfaction of human want?
C. 1.4 hours per unit A. Services
D. 1.6 hours per unit B. Goods
49. A telephone switchboard 100 pair cable can C. Commodities
be made up with either enameled wire or tinned D. Goods or commodities
wire. There will be 400 soldered connections. The 55. What are the two classifications of goods and
cost of soldering a connection on the enameled services?
wire will be P 1.65 on the tinned wire, it will be P A. Local and imported
1.15. A 100- pair cable made up with enameled B. Raw and finished
wire cost P 0.55 per linear foot and those made C. Consumer and producer
up of tinned wire cost P 0.75 per linear foot. D. Ready-made and made-to-order
Determine the length of cable run in feet so that 56. What refers to the goods and services that
the cost of each installation would be the same. are required to support human life, needs and
A. 1,000 feet activities?
B. 1,040 feet A. Producer products
C. 1,100 feet B. Consumer products
D. 1,120 feet C. Luxury
50. A leading shoe manufacturer produces a pair D. Necessity
of Lebron James signature shoes at a labor cost 57. What refers to the goods and services that
of P 900.00 a pair and a material cost of P 800.00 are desired by human and will be acquired only
a pair. The fixed charges on the business are P after all the needs have been satisfied?
5,000,000 a month and the variable costs are P A. Producer products
400.00 a pair. Royalty to Lebron James is P 1,000 B. Consumer products
per pair of shoes sold. If the shoes sell at P 5,000 a C. Luxury
pair, how many pairs must be produced each D. Necessity
month for the manufacturer to break-even? 58. What refers to the exchange mechanism that
A. 2.590 brings together the sellers and the buyers of a
B. 2,632 product, factor of production or financial
C. 2,712 security?
D. 2,890 A. Mall
51. What is defines as the analysis and evaluation B. Market
of the monetary consequences by using the C. Store
theories and principles of economics to D. Office
engineering applications, designs and projects? 59. What is considered as the basic consuming or
A. Economic Analysis demanding unit of a commodity?
B. Engineering cost analysis A. Seller
C. Engineering economy B. Manufacturer
D. Design cost analysis C. Producer
52. What is considered as the standard unit which D. Buyer or consumer
forms the basis of a country’s domestic money 60. What is defined as an entity which makes
supply? product, good or services available to buyer or
A. Monetary unit consumer in exchange of monetary
B. Currency consideration?
C. Foreign exchange A. Seller
D. Cash or check B. Manufacturer
53. What is defined as any tangible economic C. Producer
product that contributes directly or indirectly to D. Buyer or consumer
the satisfaction of human want?
A. Services
61. What is a market situation whereby there is 70. What is another term for “perfect
only one buyer of an item for which there is no competition”?
goods substitute? A. Atomistic competition
A. Monopsony B. No-limit competition
B. Monopoly C. Free-for-all competition
C. Oligopoly D. Heterogeneous market
D. Oligopsony 71. What refers to the market situation in which
62. What market situation exists where there are any given product is supplied by a very large
few sellers and few buyers? number of vendors and there is no restriction
A. Oligopoly against additional vendors from entering the
B. Oligopsony market?
C. Bilateral oligopoly A. Perfect competition
D. Bilateral Oligopsony B. Oligopoly
63. What market situation exists where there is C. Oligopsony
only one buyer and only one seller? D. Monopoly
A. Monopsony 72. Aside from many sellers and many buyers,
B. Monopoly which one is a characteristic of perfect
C. Bilateral monopsony competition?
D. Bilateral monopoly A. Homogeneous product
64. What is the market situation exist when there B. Free market entry and exit
are many buyers and many sellers? C. Perfect information and absence of all
A. Perfect competition economic friction
B. Oligopoly D. All of the above
C. Oligopsony 73. What is the opposite of perfect competition?
D. Monopoly A. Monopsony
65. If there is only one seller and many buyers, the B. Oligopoly
market situation is ________ . C. Oligopsony
A. Duopsony D. Monopoly
B. Oligopoly 74. Perfect monopoly exists only if:
C. Oligopsony A. the single vendor can prevent the entry of all
D. Monopoly other vendors in the market
66. If there are many sellers and few buyers, the B. the single vendor gets the absolute franchise
market situation is _________ . of the product
A. Duopsony C. the single vendor is the only one who has the
B. Oligopoly permit to sell
C. Oligopsony D. the single vendor is the only one who has the
D. Monopoly knowledge of the product
67. Oligopoly exists when there is/are: 75. A ______ is a market situation where
A. Few sellers and few buyers economies of scale are so significant that cost
B. Few sellers and many buyers are only minimized when the entire output of an
C. Many sellers and few buyers industry is supplied by a single producer so that
D. One seller and few buyers the supply costs are lower under monopoly that
68. Duopsony is a market situation where there under perfect competition.
is/are: A. Perfect monopoly
A. Few sellers and few buyers B. Bilateral monopoly
B. Few sellers and many buyers C. Natural monopoly
C. Many sellers and few buyers D. Ordinary monopoly
D. One seller and few buyers 76. “When one of the factors of production is
69. Duopoly is a market situation where there fixed in quantity or is difficult to increase,
is/are: increasing the other factors of production will
A. Few sellers and few buyers result in a less than proportionate increase in
B. Few sellers and many buyers output”. This statement is known as the:
C. Many sellers and few buyers A. Law of diminishing return
D. One seller and few buyers B. Law of supply
C. Law of demand A. Present worth factor
D. Law of supply and demand B. Interest rate
77. What refers to the need, want or desire for a C. Time value of money
product backed by the money to purchase it? D. Yield
A. Supply 85. The difference between the present and
B. Demand future worth of money at some time in the future
C. Product is called ______.
D. Good A. Discount
78. What refers to the amount of a product B. Deduction
made available for sale? C. Inflation
A. Supply D. Depletion
B. Demand 86. What refers to the present worth of the
C. Product probable future net earnings?
D. Good A. Total fair value
79. “Under conditions of perfect competition, the B. Total market value
price at which any given product will be supplied C. Going concern value
and purchased is the price that will result in the D. Earning value
supply and the demand being equal.” This 87. What refers to the amount of money paid for
statement is known as the: the use of borrowed capital?
A. Law of diminishing return A. Interest
B. Law of supply B. Rate of interest
C. Law of demand C. Simple interest
D. Law of supply and demand D. Principal
80. What do you call any particular raw material 88. What refers to the ratio of the interest
or primary product such as cloth, wool, flour, payment to the principal for a given unit of time
coffee, etc.? and usually expressed as a percentage of the
A. Utility principal?
B. Necessity A. Return of investment
C. Commodity B. Interest rate
D. Stock C. Yield
81. What is defined as the interest on a load or D. Rate of return
principal that is based only on the original 89. What is defined as the investment of loan or
amount of the loan or principal? principal which is based not only on the original
A. Effective rate of interest amount of the loan or principal but the amount
B. Nominal rate of interest of loaned or principal plus the previous
C. Compound interest accumulated interest?
D. Simple interest A. Effective rate of interest
82. Under ordinary simple interest, how many B. Nominal rate of interest
days in one year? C. Compound interest
A. 300 D. Simple interest
B. 360 90. What refers to the cost of borrowing money or
C. 365 the amount earned by a unit principal per unit
D. 366 time?
83. One banker’s year is equivalent to ______ A. Yield rate
days. B. Rate of return
A. 300 C. Rate of interest
B. 360 D. Economic return
C. 365 91. A uniform series of payment occurring at
D. 366 equal interval of time is called ______.
84. What refers to the cumulative effect of A. Annuity
elapsed time on the money value of an event, B. Amortization
based on the earning power of equivalent C. Depreciation
invested funds capital should or will earn? D. Bond
92. What is the term for an annuity with a fixed
time span? A. Par value of bond
A. Ordinary annuity B. Face value of bond
B. Perpetuity C. Redeemed value of bond
C. Annuity certain D. Value of bond
D. Annuity due 100. What is defined as the certificate of
93. What is the type of annuity where the indebtedness of corporation usually for a period
payments are made at the end of each period not less than 10 years and guaranteed by a
starting from the first period? mortgage on certain assets of a corporation?
A. Ordinary annuity A. Bond
B. Perpetuity B. T-bills
C. Annuity due C. Stock
D. Deferred annuity D. Promissory note
94. What is the type of annuity where the
payments are made at the beginning of the ANSWERS:
each period starting from the first period? 1. 21 %
A. Ordinary annuity 2. 6.65 %
B. Perpetuity 3. 29.17 %
C. Annuity due 4. 12 months
D. Deferred annuity 5. 25.0 %
95. What is the type of annuity that does not 6. 5,937.50
have a fixed time span but continues indefinitely 7. 10.29 %
or forever? 8. 4.00 %
A. Ordinary annuity 9. 16.28 %
B. Perpetuity 10. 11.75 %
C. Annuity due 11. 12.07 %
D. Deferred annuity 12. P18,000
96. What is the type of annuity where the first 13. 13.73 %
payment does not begin until some later date in 14. 3.90 %
the cash flow? 15. P39.45
A. Ordinary annuity 16. 9.14 %
B. Perpetuity 17. 19.72 %
C. Annuity due 18. 8.24 %
D. Deferred annuity 19. 11.60 % compounded annually
97. Which is NOT an essential element of an 20. 12.00 %
ordinary annuity? 21. 14.2 years
A. The amounts of all payments are equal. 22. 11.57 years
B. The payments are made at equal interval of 23. P705.42
time. 24. Quarterly
C. The first payment is made at the beginning of 25. P1,549.64
the first period. 26. P54.66
D. Compound interest is paid on all amounts in 27. P 152.88
the annuity. 28. P 3,260.34
98. What is defined as a financial security note 29. P 15,030.03
issued by business or corporation and by the 30. P 19,624.49
government as a means of borrowing long-term 31. P 717.17
fund? 32. P 1,185.54
A. T-bills 33. P 2,504.57
B. Securities 34. P 7,731.29
C. Bond 35. P 43,763.20
D. Bank notes 36. P 143,999.08
99. What refers to the present worth of all the 37. P 6,922.93
amount the bondholder will receive through his 38. P 4,860.00
possession of the bond? 39. 3.0%
40. P 1,144.81 93. Ordinary annuity
41. P 236.20 94. Annuity due
42. P 2,000.00 95. Perpetuity
43. 9 years 96. Deferred annuity
44. P 3,927.27 97. The first payment is made at the beginning of
45. P 9,250.00 the first period.
46. $ 5,000,000.00 98. Bond
47. 1,053 99. Value of bond
48. 1.0 hour per unit 100. Bond
49. 1,000 feet
50. 2,632
51. Economic Analysis
52. Foreign exchange
53. Goods or commodities
54. Services
55. Consumer and producer
56. Necessity
57. Necessity
58. Market
59. Buyer or consumer
60. Producer
61. Monopsony
62. Bilateral oligopoly
63. Bilateral monopoly
64. Perfect competition
65. Monopoly
66. Oligopsony
67. Few sellers and many buyers
68. Many sellers and few buyers
69. Few sellers and many buyers
70. Atomistic competition
71. Perfect competition
72. All of the above
73. Monopoly
74. the single vendor can prevent the entry of all
other vendors in the market
75. Natural monopoly
76. Law of diminishing return
77. Demand
78. Supply
79. Law of supply and demand
80. Commodity
81. Simple interest
82. 360
83. 360
84. Time value of money
85. Discount
86. Earning value
87. Interest
88. Interest rate
89. Compound interest
90. Rate of interest
91. Annuity
92. Annuity certain