PROBLEM SOLVING

ENGG-407: ENGINEERING ECONOMICS

1. Determine the ordinary simple interest on P700 for 8 months and 15 days if the rate of interest is 15%.

2. Determine the exact simple interest of P500 for the period from January 10 to October 28, 1996 at 16%
interest.

3. Determine the ordinary simple interest on P10,000 for 9 months and 15 days if the rate of interest is 6%.

4. What will be the future worth of money after 14 months , if a sum of P10,000 is invested today at a simple
interest rate of 12% per year.

5. A loan of P10,000 for 3 years at 10% simple interest per year . Determine the interest earned and the
accumulated amount.
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ENGG-407: ENGINEERING ECONOMICS
6. A total of P1,200 is invested as a simple interest rate of 6% for 14 months. How much interest is earned
on this investment?

7. Aircond network company borrowed P523,000 on May 13 with interest due on September 27, 1999. If the
interest rate is 10%, find the interest on the load using (a) exact interest
(b) simple interest.

8. What will be the future worth of money after 20 months if a sum of P25,000 is invested today at a simple
interest rate of 8% per year?

9. Find the interest amount and future value for the following loan: Principal=P6,320 Interest+ 4% from June
5- December 15, 2005.

10. Anthony takes a loan of P10,000 to buy a used truck at the rate of 5% simple interest. Calculate the annual
interest to be paid for the loan amount.

11. What will be the future worth of money after 14 months if a sum of P10,000 is invested today at a simple
interest rate of 12% per year?
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ENGG-407: ENGINEERING ECONOMICS

12. What are the present worth and the accumulated amount of a 10 year annuity paying P10,00 at the end of
each year, with interest at 15% compounded annually?

13. If the sum of P15,000 id deposited in an account earning interest at the rate of 8% compounded quarterly,
what will it become at the end of 5 years.

14. Compute the accumulated amount after 5 years of P1,000 invested at the rate of 10% per year compounded
quarterly.

15. A 5 year ordinary annuity has a present value of $1,000. If the interest rate is 8%, find the amount of each
annuity payment and the accumulated amount.

16. If P10,000 is deposited now, how much annuity at the end of each year can a person get annually from the
bank every year for 8 years cost of money is 14%?
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ENGG-407: ENGINEERING ECONOMICS

17. A man bought a car on an installment basis. If he pays P10,000 per month at a rate of 15% compounded
monthly for 3 years, find the cash price and the accumulated amount of money for the car.

18. Suppose that a father, on the day his son is born wishes to determine what lump amount would have ott be
paid into an account bearing an interest of 12% per year provided withdrawals of $2000 on each of the
sons 18th, 19th, 20th, and 21st.

19. In problem No.13, suppose that a father wishes to determine the equivalent worth of the four $2000
withdrawals as of the son’s 24th birthday.

20. Find the nominal rate which is converted quarterly instead of 12% compounded monthly. What is the
responding effective rate?

21. P4,000 is borrowed for 75 days at 16% per annum simple interest. How much will be due at the end of 75
days.
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ENGG-407: ENGINEERING ECONOMICS

22. A deposit of P110,000 was made for 31 days. The net interest after deducting 20% withholding tax is P890.
Find the rate of return annualy.

23. What will be the future worth of money after 12 months, if the sum of P25,000 is invested today at a simple
interest rate at 1% per month.

24. If you borrowed money from your friend with a simple interest of 12%, find the present worth of P50,000,
which is due at the end of 7 months.

25. A P20,000 loan was originally made at 8% simple interest for 4 years. At the end of this period the loan
was extended for 3 years without the interest being paid, but the new interest was 10% compounded semi-
annually. How much would the borrower pay at the end of 7 years.

26. Alexander Michaek owes P25,000 due in 1year and P75,000 due in 4 years. He agrees to pay P50,000
today and the balance in 2 years. How much money does he pay at the end of two years if money is worth
5% compounded annually?
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ENGG-407: ENGINEERING ECONOMICS

27. Engr. Carl owes Engr. Rachelle P25,000 due in 1 year and P7,500 due in 5 years.He agrees to pay P51,000
today and the balance in 2 years. How much will he pay at the end of two years if money is worth 5%
compounded semi-annually?

28. On January 1, 1999 Miss Lee opened an account at BPI with an initial deposit of P1,000,000. On August
1, 2000 she opened an additional P2,000,000. If the bank pays 12% interest compounded monthly, how
much will be at the account on December 1, 2000?

29. What are the present worth and the accumulated amount of 10-year annuity paying P10,000 at the
beginning of each year, with interest at 15% compounded annually.

30. A housewife bought a brand new washing machine costing P12,000 id paid in cash. However, she can
purchase it on an installment basis to be paid within 5 years. If money is worth 8% compounded annually,
what is her yearly amortization if all payments are to be made at the beginning of each year?

31. Consider the perpetuity paying $100 a year. If the relevant interest rate is 8%, what is the value of the
consol? What is the value of consol if the interest rate goes down to 6%?
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ENGG-407: ENGINEERING ECONOMICS

32. What amount of money invested today at 15% interest can provide the following scholarship: P30,000 at
the end of year for 6 years; P40,000 for the next 6 years and P50,00 thereafter?

1001 SOLVED PROBLEMS BOOK

1. P4,000 is borrowed for 75 days at 16% per annum simple interest. How much will be due at the end of 75
days?

2. A deposit of P110,000 was made for 31 days. The net interest after deducting 20% withholding tax is
P890.36. Find the rate of return annually?

3. Agnes Abanilla was granted a loan of P20,000 by her employer CMP Industrial Fabricator and Constructing
Corporation with an interest at 6% for 180 days on the principal collected in advance. This corporation
would accept a promissory note for P20,000 non-interest for 180 days. If counted at once, find the proceeds
of the note.

4. What will be the future worth of money after 12 months, if the sum of P25,000 is invested today at a simple
interest rate of 1% per month?

5. If you borrowed money from your friend with a simple interest of 12%, find the present worth of P50,000
which is due at the end of 7 months.

6. Annie buys a television set from a merchant who asks P1,250 at the end of 60 days. Annie wishes to pay
immediately and the merchant offers to compute the cash price on the assumption that money is worth 8%
simple interest. What is the cash prize?
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ENGG-407: ENGINEERING ECONOMICS

7. It is the practice of almost all banks in the Philippines that when they grant a loan, the interest for one year
is automatically deducted from the principal amount upon release of money to a borrower. Let us therefore
assume 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 deducted and you were given a check of P68,000. Since you have to pay the amount
of P80,000 one year after, what then will be the effective interest rate?

8. A man borrowed from a commercial bank which has a simple interest rate of 16% but the interest is to be
deducted from the loan at the time that the money was borrowed and the loan is payable at the end of the
year. How much is the actual rate of interest?

9. A bank charges 12% simple interest on a P300.00 loan. How much will be repaid if the loan is paid back in
one lump sum after three years?

10. A man borrowed P100,000 at the interest rate of 12% per annum, compounded quarterly. What is the
effective rate?

11. What is the corresponding effective rate of 18% compounded semi-quarterly?

12. Mandarin bank advertises a 9.5% account that yields 9.84% annually. Find how often the interest is
compounded.
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ENGG-407: ENGINEERING ECONOMICS

13. A bank pays one percent interest on a savings account four times a year. The effective annual interest rate
is?

14. The effective rate of 14% compounded semi-annually is?

15. An interest rate is quoted as being 7.5% compounded quarterly. What is the effective annual interest rate
?

16. The amount if P12,800 in 4 years at 5% compounded quarterly is?

17. Find the present worth of future payment of P100,000 to be made in 10 years with an interest rate of 12%
compounded quarterly.

18. On his 6th birthday a boy is left an inheritance. The inheritance will be paid in a lump sum of P10,000 on
his 21st birthday. What is the present value of the inheritance as of the boy’s 6th birthday, if the present is
compounded annually? Assume i=4%.

19. The amount of P50,000 was deposited in the bank earning at interest of 7.5 % per annum. Determine the
total amount at the end of 5 years, if the principal and interest were not withdrawn during the period?
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ENGG-407: ENGINEERING ECONOMICS
20. Alexander Michael owes P25,000 due in 1 year and P75,000 due in 4 years. He agrees to pay P50,000
today and the balance in 2 years. How much must he pay at the end of two years if money is worth 5%
compounded semi-annually?

21. At an interest rate of 10% compounded annually, how much will a deposit of P1,500 be in 15 years?

22. How long (in years) will it take money to quadruple if it earns 7% compounded semi-annually?

23. In how many years is required for P2,000 to increase by P3,000 if interest at 12% compounded semi-
annually?

24. Consider a deposit of P600.00 to be paid back in one year by P700.00. What are the conditions of the rate
of interest, i% per year compounded annually such that the net present worth of the investment is positive?
Assume i>=0.

25. A company invests P10,000 today to be repaid in 5 years in one lump sum at 12% compounded annually.
How much profit in present day pesos is realized?

26. A firm borrows P2,000 for 6 years at 8%. At the end of 6 years , it renews the loan for the amount due plus
P2,000 more for 2 years at 8%. What is the lump sum due?

27. A deposit of P1,000 is made in a bank account that pays 8% interest compounded annually. Approximately
how much money will be in the account after 10 years?
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ENGG-407: ENGINEERING ECONOMICS

28. P200,000 was deposited on January 1, 1988 at an interest rate of 24% compounded semi-annually. How
much would the sum be on January 1, 1993?

29. If P500,000 is deposited at a rate of 11.25% compounded monthly, determine the compounded interest
after 7 years and 9 months.

30. 15 years ago P1,000 was deposited in a bank account, and today it is worth P2,370. The bank pays interest
semi-annually. What was the interest rate paid in this account?

31. If P5,000 shall accumulate for 10 years at 8% compounded quarterly, find the compounded interest at the
end of 10 years.

32. A sum of P1,000 is invested now and left for 8 years, at which time the principal is withdrawn. The interest
that has accrued is left for another 8 years. If the effective annual interest rate is 5%, what will be the
withdrawal amount at the end of 16th year?

33. P1,500 was deposited in a bank account, 20 years ago. Today it is worth P3,000. Interest is paid semi-
annually. Determine the interest paid on this account.
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ENGG-407: ENGINEERING ECONOMICS

34. A merchant puts in his P2,000 to a small business for a period of six years. With a given interest rate on
the investment of 15% per year, compounded annually, how much will he collect at the end of the 6th year?

35. A man expects to receive P25,000 in 8 years. How much is that money worth now considering interest at
8% compounded quarterly?

36. P500,000 was deposited 20.15 years ago at an interest rate of 7% compounded semi-annually. How much
is the sum now?

37. In year zero, you invest P10,000 in a 15% security for 5 years. During that time the average annual inflation
is 6%. How much, in terms of year zero pesos will be in the account at maturity?

38. By the condition of a will, the sum of P20,000 is left to a girl to be held in trust fund by her guardian until it
amounts to P50,000. When will the girl receive the money if the fund is invested at 8% compounded
quarterly?

39. You borrow P3,500 for one year from a friend at an interest rate of 1.5% per month instead of taking a loan
from a bank at a rate of 18% per year. Compare how much money you will save or lose on the transaction.
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ENGG-407: ENGINEERING ECONOMICS

40. What is the present worth of two P100 payments at the end of the third year and fourth year? The annual
interest rate is 8%.