KRISTOFFER JOHN GIGANTO (20102597)

1. For 5 % per year interest rest, show which of the following statements are true and which are
false.
(a) 98.00 now is equivalent to 105.60 one year from now

FALSE
Solution:
Rate of Interest: 5% = 0.05

(98)(0.05) = 4.9
98 + 4.9 = 102.90

(b) 200.00 one year ago is equivalent to 205.00 now.

FALSE
Solution:
Rate of Interest: 5% = 0.05

(200)(0.05) = 10
200 + 10 = 210.00

2. Jonathan borrowed money worth P25,000.00 from his friend Jimmy to buy a set of portable
welding machine. He promised to pay an amount of P30,000.00 with 20% simple interest. How
many days did Jimmy charge Jonathan to pay his debt? How much is the interest of the
borrowed money?
P = 25,000 F = 30,000 i = 0.20
1 30,000
𝑛=( ) [( ) − 1] = 1
0.20 25,000

n = 365 days = 1 year

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 = (25,000)(0.20)(1)
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 = 𝟓𝟎𝟎𝟎
3. A bank charges 12% simple interest on a P3,000,000 loan. How much will be paid if the loan
is paid back in one lump sum after 5 years?
P = 3,000,000 i = 12% = 0.12 n = 5 years

Number of Borrowed Interest, I Payment Amount

Periods, n Amount, P Owed,F
0 3,000,000 0 0 3,000,000
1 ------------ 360,000 0 3,360,000
2 ------------ 360,000 0 3,720,000
3 ------------ 360,000 0 4,080,000
4 ------------ 360,000 0 4,400,000
5 ------------ 360,000 0 4,800,000
Formula:
𝐹 = 𝑃(1 + 𝑖𝑛)
= 3,000,000[1 + 0.12(5)]
𝐹 = 𝑷𝟒, 𝟖𝟎𝟎, 𝟎𝟎𝟎

4. If the future amount is 35% more than the principal after 8 months determine the simple
interest rate.
i = 35% = 0.35 n = 8 months

𝐹 = (𝑃 + 𝑃𝑖𝑛)
𝐹 = 𝑃(1 + 𝑖𝑛)
𝑃 + 0.35𝑃 = 𝑃(1 + 𝑖𝑛)
1.35𝑃 = 𝑃[1 + 𝑖(8/12)]
1.35𝑃 = 𝑃 + 𝑃𝑖(8/12)
1.35𝑃 − 𝑃 = 𝑃𝑖(8/12)
8
0.35𝑃 𝑃𝑖 (12)
=
𝑃 𝑃
8
0.35 𝑖 (12)
=
8 8
12 12
0.35
𝑖=
8
12

𝑖 = 𝟓𝟐. 𝟓
5. Fred wanted to buy a refrigerator which will have a price of P13,000 for 90 days from now
due to the increase in prices of 12 % simple interest. What is the worth of the refrigerator?
i = 12% = 0.12 F = P13,000 n = 90 days

P = A / (1 + (i)(n))
90
𝑃 = 13,000 (1 + (0.12) ( ))
360
𝑷 = 𝟏𝟐, 𝟗𝟗𝟔. 𝟏𝟎

P = A / (1 + (i)(n))
90
𝑃 = 13,000 (1 + (0.12) ( ))
365
𝑷 = 𝟏𝟐, 𝟗𝟗𝟔. 𝟏𝟓
6. Explain the term time value of money.
It is the notion that a sum of money is worth more now than it will be at a later period due
to the possibility of earning more in the interval. The term "time value of money" refers to
the fact that an amount of money is worth more now than it will be in the future.

7. You meet a friend on a bus to the beach and tell her you are taking a course in engineering
economy. She asks what it is. What do you answer?
So, I'll explain her what this course means, which is indicated following this line. It is a
branch of economics focused with the application of economic concepts to engineering
decision-making. Its concentration as a subject is on the part of economics known as
microeconomics, which analyzes how people and companies make decisions about the
distribution of limited resources. As a result, it concentrates on the decision-making
process, as well as its context and surroundings. It is practical in character, combining
economic theory with engineering experience. And tell him/her everything there is to
know about this course.

8. Explain the term time measure of worth.

The standard response employs the concept of "opportunity cost," where the value of
anything is defined as "the cost of the most valued forgone alternative." The value of
something can only be determined by comparing it to the value of something else.