EECO 001| ENGINEERING ECONOMY

ASSIGNMENT NO.1| TIME AND MONEY RELATIONSHIP

1ST SEMESTER| 2020-2021
SITUATIONAL PROBLEM NO I: (SIMPLE INTEREST)
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?
P=₱300.00, n= 3 years, i=0.12 , F=?
F = P(1+in)
F= 300(1+0.12(3))
F= ₱408
SITUATIONAL PROBLEM NO II: (EXACT SIMPLE INTEREST)
Joe, Vito, and Henry borrow $35,000 from Bruno the loan shark on September 22, 1951 on a
condition that the loan repayment shall be $55,000 on September 25, 1951. What is the interest
rate on the loan?
3
F=55,000 P=35,000 n= 365

F= p (1 +ni)
3
55,000=35,000 (1+ i) *Solve using shift solve in calculator*
365

i= 69.52%
SITUATIONAL PROBLEM NO III: (COMPOUND INTEREST)
A man possesses a promissory note, due in 3 years hence, whose maturity value is P6,700.48. If
the rate of interest is 10% compounded semi-annually. What is the value of the note now?
𝑖𝑛
F= P (1 + 𝑚 )−𝑛
0.1 2(-3)
F= ₱6,700.48 (1 + )
2
0.1 -6
F= ₱6,700.48 (1 + )
2

F= ₱5,000
SITUATIONAL PROBLEM NO IV: (RATE OF INTEREST)
Which is better, to invest in 5.5% compounded semi-annually or 5% compounded monthly?
5.5 % Compounded semi-annually 5% Compounded monthly

0.055 0.05
ieff= (1+ 2 )2 – 1 ieff = (1 + 12 )12 -1
ieff = 5.58 % ieff = 5.12 %

Final Answer: It is better to invest in 5.5 compounded semi-annually.

 EECO 001| ENGINEERING ECONOMY
ASSIGNMENT NO.1| TIME AND MONEY RELATIONSHIP
1ST SEMESTER| 2020-2021
SITUATIONAL PROBLEM NO V: (DISCOUNT)
Arlo borrowed P2000 from a bank and promised to pay the amount for one year. He received
only the amount of P1920.00 after the bank collected an advance interest of P80.00 What was the
rate of discount and the rate of interest that the bank collected in advance?
Rate of interest Rate of discount
𝐼 𝑖
i= 𝑃𝑛 d= 1+𝑖
₱80 0.04166
i= 1920 (1 ) d= 1+0.04166
i= 0.04166 d= 0.03999
i= 4.17% d= 4%

SITUATIONAL PROBLEM NO VI: (EQUATION OF VALUES)

Davie bought a bass guitar from a music store who ask for 1250 USD Dollars if paid at the end
of 90 days. However, Davie wants to pay immediately, and the music store offers to recompute
for the cash price. What is the cash price if money is worth 8% annually?
90
P=$1250 i= 0.08 n=360 = 0.25

F= P(1 + 𝑖)𝑛

F=1250(1 + 0.08)0.25
F=1274.28