Bicol University Name: Group 4

COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

: Provide a complete solution/explanation/justification for the problems to gain FULL

MERIT. Please WRITE LEGIBLY and AVOID ERASURES. Kindly provide a separate sheet for your
solutions if necessary.

PART I. Simple Interest.

1. Find the ordinary interest and the amount:

a. on Php 20,000 at 8% for 225 days

Given: Required:

P = Php 20 000 I =?
r = 8% or 0.008
𝟐𝟐𝟓 𝒅𝒂𝒚𝒔
n = 𝟑𝟔𝟎 𝒅𝒂𝒚𝒔 F =?

Solution:

I = Prn F=P+I
𝟐𝟐𝟓 𝒅𝒂𝒚𝒔 F = 20 000 + 1 000
I = (20 000) (0.08) (𝟑𝟔𝟎 𝒅𝒂𝒚𝒔)
F = Php 21 000
I = Php 1 000

Therefore, the ordinary interest is Php 1 000 and final amount of Php 21 000.

b. on Php 7,500 at 16% for 270 days

Given: Required:

P = Php 7 500 I =?
r = 16% or 0.16
𝟐𝟕𝟎 𝒅𝒂𝒚𝒔
n = 𝟑𝟔𝟎 𝒅𝒂𝒚𝒔 F =?
 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

Solution:

I = Prn F=P+I
𝟐𝟕𝟎 𝒅𝒂𝒚𝒔 F = 7 500 + 900
I = (7 500) (0.16) (𝟑𝟔𝟎 𝒅𝒂𝒚𝒔)
F = Php 8 400
I = Php 900

Therefore, the ordinary interest is Php 900 and final amount of Php 8 400.

2. Find the exact interest and the amount:

a. on Php 12,000 at 4% for 146 days

Given: Required:

P = 12 000 I =?
r = 4% or 0.04
n=
𝟏𝟒𝟔 𝒅𝒂𝒚𝒔 F =?
𝟑𝟔𝟓 𝒅𝒂𝒚𝒔

Solution:

I = Prn F=P+I
𝟏𝟒𝟔 𝒅𝒂𝒚𝒔 F = 12 000 + 192
I = (12 000) (0.04) (𝟑𝟔𝟓 𝒅𝒂𝒚𝒔)
F = Php 12 192
I = Php 192

Therefore, the exact interest is Php 192 with final amount of Php 12 192.

b. on Php 40,000 at 6% for 312 days

 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

Given: Required:

P = Php 40 000 I =?
r = 6% or 0.06
𝟑𝟏𝟐 𝒅𝒂𝒚𝒔 F =?
n = 𝟑𝟔𝟓 𝒅𝒂𝒚𝒔

Solution:

I = Prn F=P+I
𝟑𝟏𝟐 𝒅𝒂𝒚𝒔 F = 40 000 + 2 051.51
I = (40 000) (0.06) (𝟑𝟔𝟓 𝒅𝒂𝒚𝒔)
F = Php 42 051.51
I = Php 2 051.51

Therefore, the exact interest is Php 2 051.51 with final amount of Php 42 051.51.

3. Find the actual and approximate time between July 9, 2020, and August 18, 2022.

Approximate Time

Year Month Day

2022 8 18 August 18, 2022

- 2020 - 7 - 9 July 9, 2020

2 years 1 month 9 days

2 (360 days) + 1 (30 days) + 9 days = 720 days + 30 days + 9 days = 759 days

Approximate Time = 759 days

Actual Time

July 9, 2020 to July 9, 2021 is equal to 365 days.

July 9, 2021 to July 9, 2022 is equal to 365 days.

 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

July 9, 2022 to August 18, 2022 = (31 – 9) + 18 = 40 days

Actual time = 365 + 365 + 40 = 770 days

Actual Time = 770 days

4. The future value of a Php 50,000 investment invested at 14% simple interest at the end of
75 months.

Given: Required:

P = Php 50 000 F =?
i = 14% or o.14
n = 75 months

Solution:

F = P (1 + in)
75
F = 50 000 (1 + (0.14) (12)

F = Php 93 750

Therefore, the future value is Php 93 750.

5. Find the interest on Php 22,500 at 8% from March 12 to July 9, 2020.

Given: Required:

P = Php 22 500 n =?
i = 8% or 0.08
I =?
 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

Solution:

Finding n

July 9, 2020 7: 9: 2020

March 12, 2020 3: 12: 2020

4 3 0

n = (30) 4 +3 = 123 days

Finding I

I = Pin
123 𝑑𝑎𝑦𝑠
I = (22 500) (0.08) (360 𝑑𝑎𝑦𝑠)

I = Php 615

Therefore, the interest is Php 615.

6. If money is worth 6% simple interest, find the present value of Php 15,000 due at the end
of 7 ½ years.

Given: Required:

F = Php 15 000 P =?
i = 6% or 0.06
n = 7.5 years

Solution:

F = P (1 + in)
𝐹
P = (1+𝑖𝑛)

15 000
P = (1+(0.06)(7.5))
 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

P = Php 10 344.83

Therefore, the present value is Php 10 344.83.

7. A debtor owes Php 22,000 due at the end of 2 years. He asks his creditors for the
privilege of paying the debt immediately. At what simple interest, 6% or 8%, would the
creditor prefer to compute the required present value, and how much would he gain by
the better choice?

Given:
F = Php 22 000
n = 2 years
𝑖1 = 6% 𝑜𝑟 0.06
𝑖2 = 8% 𝑜𝑟 0.08
Asked:
P =?
Solution:
F=P+I
F = P (1 + in)
𝟐𝟐 𝟎𝟎𝟎 = 𝑷𝟏 (𝟏 + (𝟎. 𝟎𝟔)(𝟐)) 𝟐𝟐 𝟎𝟎𝟎 = 𝑷𝟐 (𝟏 + (𝟎. 𝟎𝟖)(𝟐))
𝑷𝟏 = 𝟏𝟗 𝟔𝟒𝟐. 𝟖𝟔 𝑷𝟐 = 𝟏𝟖 𝟗𝟔𝟓. 𝟓𝟐

|𝑃1 − 𝑃2 | = |19 642.86 − 18 965.52| = 𝟔𝟕𝟕. 𝟑𝟒

Therefore, a simple interest of 6% is a better choice for the creditor. For which he/she will gain a
Php 677 greater than the other simple interest (8%).

8. Find the present value of Php 20,000 due at the end of 6 months if the discount rate is
5%. What is the discount?

Given:
F = Php 20 000
n = 6 months
d = 5% or 0.05
Asked:
P =?
I =?
Solution:
 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

P = F (1 – dn)
6
P = 20 000 (1 – (0.05) (12))
P = Php 19 500

The discount is
P=F–I
I=F–P
I = 20 000 – 19 500
I = Php 500

Therefore, the present value is Php 19 500 with a discount of Php 500.

9. If Php 12,000 is due on December 31, 2020, find the present value on June 19, 2020, if
the discount rate is 8%.

Given:
F = Php 12 000
n = 195 days
d = 8% or 0.08
Asked:
P =?
Solution:
P = F (1 – dn)
195
P = 12 000 (1 – (0.08) (366))
P = Php 11 488.52

Therefore, the present value is Php 11 488.52.

10. Find the simple discount rate which is equivalent to the simple interest rate 6% in
accumulating or discounting money for 8 months.

Given:
i = 6% or 0.06
n = 8 months
Asked:
d =?
Solution:
F = P (1 + in) = [F (1 – dn)] (1 + in)
 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

1 = (1 – dn) (1 + in)
8 8
1 = (1 – d (12)) (1 + (0.06) ( 12))
1 = 1.04 – 0.693d
0.693d = 1.04 – 1
d = 0.058 or 5.8%

Therefore, the simple discount rate is 5.8%.

 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

PART II. Compound Interest.

1. Find the interest earned if Php 10,000 is invested for 2 years:

a. at 8% compounded quarterly
Given:
P = Php 10 000
t = 2 years
r = 8% or 0.08
n=4
Required:
A =?
Solution:
𝑟 𝑛𝑡
A = P (1 + 𝑛
)
0.08 4(2)
A = 10,000 (1 + 4
)

A = 10,000 (1 + .02)8
A = 10,000 (1.171659381)
A = 11,716.59

I=A–P
I = 11,716.59 – 10,000
I = 1,716.59
Therefore, the interest is Php 1 716.59.

b. at 8% compounded monthly
Given:
P = Php 10 000
t = 2 years
r = 8% or 0.08
n=4
 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

Required:
A =?
Solution:
𝑟 𝑛𝑡
A = P (1 + 𝑛
)
0.08 12(2)
A = 10,000 (1 + 12
)
1 24
A = 10,000 (1 + 150
)
A = 10,000 (1.172887932)
A = 11,728.88

I=A–P
I = 11,728.88 – 10,000
I = 1,728.88
Therefore, the interest is Php 1 728.88.

2. Accumulate Php 10,000 for 20 years:

a. at 6% compounded annually
Given:
P = Php 10 000
r = 6% or 0.06
t = 20 years
Required:
A =?
Solution:
A = P (1 + r) t
A = 10,000 (1 + 0.06)20
A = 10,000 (1.06)20
A = 32,071.35

b. at 6% compounded continuously
 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

Given:
P = Php 10 000
r = 6% or 0.06
t = 20 years
Required:
A =?
Solution:
A = 𝑃𝑒 𝑟𝑡
A = 10,000 𝑒 𝑜.𝑜6(20)
A = 33,201.17

3. At the birth of a child, what sum should his father invest in order to provide the child
with Php 400,000 at age 21, covering the expense of his college tuition, if the money
earns 4% compounded quarterly?
Given:
A = Php 250 000
t = 4 years
r = 8% or 0.08
n = 12
Required:
P =?
Solution:

𝐴
P= 𝑟 𝑛𝑡
(1 + )
𝑛
400,000
P= 0.04 4(21)
(1 + )
4
400,000
P = 2.306722744
P = 173,406.1889
 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

4. To provide for the purchase of an automobile worth Php 250,000 as a gift to his son
when he graduates from college 4 years from now, how much should the father invest
today at 8% compounded monthly?
Given:
A = Php 250 000
t = 4 years
r = 8% or 0.08
n = 12
Required:
P =?
Solution:
𝐴
P= 𝑟 𝑛𝑡
(1 + )
𝑛
250,000
P= 0.08 12(4)
(1 + )
12
250,000
P = 1.3756661
P = 181,730.1451

5. Find the present value on August 10, 2020, of Php 25,000 due on December 18, 2020, at
4% compounded monthly.
Given:
F = Php 25 000
d = 4% or 0.04
m = 12 for monthly
22+30+31+30+18
n= 365
= 0.3589041096
Required:
P =?
Solution:
𝑑 −𝑛(𝑚)
P = F (1 + 𝑚
)
0.04 −0.3589041096 (12)
P = 25 000 (1 + 12
)
 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

P = Php 24 644.25

6. Discount Php 40,000 for 25 years at 14% compounded semiannually.

Given:
F = Php 40 000
n = 25 years
d = 14% or 0.14
m = 2 for semiannually
Required:
P =?
I =?
Solution:
𝑑 −𝑛(𝑚)
P = F (1 + 𝑚
)
0.14 −25 (2)
P = 40 000 (1 + 2
)

P = Php 1 357.91

I=F–P
I = 40 000 – 1 357. 91
I = Php 38 642.09

7. How much must a man, 25 years of age, invest today in an account paying 2.5%
compounded quarterly in order to have Php 100,000 in the account when he retires at
the age of 55, that is, 30 years from now?
Given:
r = 2.5% or 0.025
F = Php 100 000
t = 30 years
m = 4 for quarterly
 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

Required:
P =?
Solution:
𝑟 −𝑚𝑡
P = F (1 + 𝑚
)

0.025 −4 (30)
P = 100 000 (1 + 4
)

P = Php 47 347.04

8. I owe Php 50,000 which is due without interest at the end of 2 years. What should my
creditor be willing to accept now in place of the future payment if he is able to invest
money at 12% compounded semiannually?
Given:
P = Php 50 000
t = 2 years
r = 12% or 0.12
m = 2 for semiannually
Required:
F =?
Solution:
𝑟 𝑚𝑡
F = P (1 + 𝑚
)

0.12 2(2)
F = 50 000 (1 + 2
)

F = Php 63 123.85

9. Mr. Allorde owes the bank Php 40,000 now. He negotiates to pay the principal plus
accumulated simple interest at the rate of 6% at the end of 3 years. The bank insists on
charging 6% compounded quarterly. How much more will the bank receive at the end of
3 years as compared to his offer?
Given:
P = Php 40 000
i = 6% or 0.06
 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

n = 3 years
[BES 12] Engineering Economics
Worksheet #3 – Interest and the Time Value of Money

6% = compounded quarterly
Required:
I =?
A =?
Amount of money that the bank would receive
Solution:
I = Pin
I = (40 000) (0.06) (3)
I = Php 7 200

𝑟 𝑛𝑡
A = P (1 + 𝑛
)
0.06 4(3)
A = 40,000 (1 + 4
)

A = Php 47 824.73

Php 47 824.73 - Php 7 200 = Php 40 624. 73

10. A man borrows Php 150,000 with the creditor agreeing that the interest at the nominal
rate of 6% will be converted into principal only once in each two years. Find the effective
rate.
Given:
P = Php 150 000
r = 6% or 0.06
m = 2 years or 24 months
Required:
ER =?
Solution:
𝑟 𝑚
𝐸𝑅 = (1 + 𝑚) − 1
0.06 24
ER = (1 + 24
) −1
 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

ER = 0.062

Therefore, the effective interest is 6.2 %.

 Bicol University Name: Group 4
COLLEGE OF ENGINEERING
Electrical Engineering Department Yr./Blk.: BSCE-2C
Legazpi City

[BES 12] Engineering Economics

Worksheet #3 – Interest and the Time Value of Money

Group 4:
BO, JOAN CATHERINE C.
COSA, JOHN TITUS
DOMDOM, SHAIMY ROSE B.
MILLARES, ALYSSA
MIRARAN, JANELLA ANNE O.
MORTEGA, SIMON JAMES
PEREZ, ERRIAN ISAAC
SEGUNDO, JOACHIM