ENGINEERING ECONOMICS repaid if the load is paid back in one

lump sum after three years?

PROBLEM 1 a) P408.00
b) P415.00
A Man borrowed P2,000.00 from a bank
c) P551.00
and a promise to pay the amount for
d) P450.00
one year. He received only the amount
of P1,920.00 after the bank collected an
advance interest of P80.00. What was PROBLEM 5
the rate of discount and the rate of It is the practice of almost all bank in the
interest that the bank collected in Philippines that when they grant a loan,
advance? the interest for one year is automatically
deducted the principal amount upon the
a) 4%; 4.17% release of money to a borrower. Let us
b) 3%; 3.17% therefore assume you applied for a loan
c) 4%; 4.71% with a bank and the P80,000.00 was
d) 3%; 3.71% approved at an interest rate of 14% of
which P11,200.00 was deducted and
you were given a check of P68,800.00.
PROBLEM 2
Since you have to pay the amount of
If you borrowed money from your friend P80,000.00 one year after, what then
with simple interest of 12%, find the will be the effective interest rate?
present worth of P50,000.00, which due a) 15.90%
at the end of 7 months. b) 16.28%
c) 16.30%
a) P46,200
d) 16.20%
b) P44,893
c) P46,730
d) P45,789
PROBLEM 6
A deposit of P110,000.00 was made for
31 days. The net interest after deducting
20% withholding tax is P890.36. Find
PROBLEM 3
the rate of return annually.
A price tag of P1200.00 is payable in 60
a) 12.25
days but if paid within 30 days it will
b) 11.75
have a 3% discount. Find the rate of
c) 12.75
interest.
d) 11.95
a) 37.1%
b) 40.2%
c) 38.5%
d) 39.3%

ENGINEERING ECONOMICS

PROBLEM 4
A bank charges 12% simple interest on
a P300.00 loan. How much will be
PROBLEM 7
P5,000 is borrowed for 75 days at 16%
per annum simple interest. How much
will be due at the end of 75 days?
a) P6167.30
 b) P5164.38 a) P18,800.00
c) P5166.67 b) P19,000.00
d) P6666.67 c) P18,000.00
d) P18,400.00
PROBLEM 8
A business man wishes to earn 7% on PROBLEM 11
his capital after payment of taxes. If the A man borrowed from a bank under a
income from an available investment will promissory note that he signed in the
be taxed at an average of 42%, what amount of P25, 000.00 for a period of
minimum of return, before payment of one year. He received only the amount
taxes, must the investment offer to be of P21, 915.00 after the bank collected
justified? the advance interest and an additional
a) 12.1% amount of P85.00 for notarial and
b) 13.4% inspection fees. What was the rate of
c) 11.1% interest that the bank collected in
d) 12.7% advance?
a) 13.64%
b) 18.37%
PROBLEM 9 c) 16.43%
A P40,000.00 is borrowed for 75 days at d) 10.32%
16% per annum simple interest. How
much will be due at the end of 75 days?
a) P5212.43
b) P4954.35
c) P4133.33
d) P6422.44

PROBLEM 10
Agnes Abanilla was granted a loan of
P20,000.00 by her employer CPM
industrial Fabricator and Construction
Corporation with an interest at 6% for
180 days on the principal collected in
advance. The corporation would accept
a promissory note for P20,000.00 non-
interest for 180 days. If discounted
once, find the proceeds on the note.
ENGINEERING ECONOMICS
PROBLEM 12
If you borrow money from you friend
with simple interest of 12%, find the
present worth of P20,000.00 , which
was due at the end of nine months.
a) P18,348.00
b) P19,485.00
c) P28,394.45
d) P42,953.10
PROBLEM 13
Mr. J. de la Cruz borrowed money from
a bank. He received from the bank
P1340 and promised to pay P1500 at
the end of 9 months. Determine the
following:
1) Simple Interest Rate
 a) 15.92% c) 6.15%
b) 17.89% d) 6.02%
c) 16.90%
d) 17.70% PROBLEM 17
2) The corresponding discount rate Mr. Almagro made a money market
or often referred to as the placement of P1,000,000 for 30 days at
“Bankers discounts” 7.5% per year. If the withholding tax is
a) 14.78% 20%, what is the net interest that Mr.
b) 15.35% Almagro will receive at the end of the
c) 15.50% month?
d) 13.73% a) P3000
b) P4000
c) P6000
PROBLEM 14 d) P5000
Kath buys a television set from a
merchant who asks P1,250.00 at the
end of 60 days (cash in 60 days). Kath
wishes to pay immediately and the ENGINEERING ECONOMICS
merchant offers to compute the cash
price on the assumption that money is
PROBLEM 18
worth 8% simple interest. What is the
A bill for motorboat specifies the cost as
cash price today?
P1200 due at the end of 100 days but
offers a 4% discount for cash in 30
days. What is the highest rate, simple
interest at which the buyer can afford to
a) P1233.55
borrow money in order to take
b) P1324.45
advantage of the discount?
c) P2195.60
a) 18.4%
d) P2135.50
b) 19.6%
c) 20.9%
PROBLEM 15 d) 21.4%
Find the amount due at the end of 15
months whose present value is P2000
PROBLEM 19
at 5% simple discount.
In buying a computer disk, the buyer
a) P2133.33
was offered the options of paying P250
b) P2313.12
cash at the end of 30 days or P270 at
c) P2233.23
the end of 120 days. At what rate is the
d) P2333.22
buyer paying simple interest if he agree
PROBLEM 16 to pay at the end of 120 days.
What simple interest rate is equivalent a) 32%
the simple discount rate of 6% in b) 40%
discounting an amount P1000 due at the c) 28%
end of 3 Months? d) 25%

a) 6.09%
PROBLEM 20
b) 9.12%
On March 1, 1996 Mr. Almagro obtains d) 14.8%
a loan P1500 from Mr. Abella and signs
a note promising to pay the principal
and accumulated simple interest at the
rate of 5% at the end of 120 days. On
May 15 1996, Mr. Abella discounts the
note at the bank whose discount rate is
6%. What does he received?
a) P2201.48
ENGINEERING ECONOMICS
b) P1123.29
c) P1513.56 PROBLEM 24
d) P938.20 A Bank deposit of P4000 was made one
year ago in one of the local banks which
pays monthly interest. The bank account
accumulates now to P4, 392.60.
PROBLEM 21 Compute the effective annual interest
A loan was made 3 years and 4 months rate.
ago at 6% simple interest. The principal a) 6.54%
amount of the loan has just been repaid b) 9.82%
along with P800 of interest. Compute c) 4.86%
the principal amount of the original loan. d) 8.92%
a) P4000
b) P3800 PROBLEM 25
c) P5000 A businessman invested P50, 000.00 in
d) P2500 a company that engage in manufacture
of plastic products. In return he receives
PROBLEM 22 P3, 000 per year for 5 years and his
A bank loan of P2,000.00 was made at P50,000 investment back at the end of
8% simple interest. How long would it the 5 years. Compute the rate of return
take in years for the amount of the loan of the investment.
and interest to equal P3,280.00 a) 6%
a) 6 b) 4%
b) 7 c) 5%
c) 8 d) 7%
d) 5
PROBLEM 26
PROBLEM 23
A businessman loan P100,000 from a A man deposit P100,000 for one year
bank to expand its business. A quarterly which pays 6% interest annually. He has
interest of P4, 400.00 must be paid a taxable income and the bank charges
every three months and the entire a withholding tax of 20% incremental
principal of P100, 000.00 will be repaid income tax rate. Compute the after tax
in 4 years. Compute the nominal annual rate of return of his deposit?
interest paid by the businessman. a) 4.80%
a) 17.6% b) 3.61%
b) 16.7% c) 5.41%
c) 15.6% d) 5.62%
 PROBLEM 30
Discount P1650 for 4 months at 6%
simple interest. What is the discount?
a) P32.35
PROBLEM 27 b) P33.00
A businessman bought a P1,000 taxable c) P34.25
corporation bond in which he will receive d) P31.35
P150 a year in interest and his P1000
back when the bond becomes due in 5 PROBLEM 31
years. If the income tax rate is 28%, Find the discount if P2000 is discounted
compute the after-tax rate of return for for 6 months at 8% simple discount.
this investment. a) P80.00
a) 10.8% b) P76.92
b) 9.6% c) P77.66
c) 7.8% d) P88.40
d) 11.2%
PROBLEM 32
PROBLEM 28 Compute the discount if P2,000 is
A man applied for a car loan in local discounted for 6 months at 8% simple
financing bank which charges a rate of interest.
interest of 18%. Interest in this type of a) P76.92
transaction is to be deducted from the b) P77.60
loan at the time the money is released. c) P80.00
At the end of one year the borrower will d) P88.40
have to pay the same amount what is
stated in his application for the loan. PROBLEM 33
What is the actual interest did the I owe P10,000 due at the end of 3 years
financing bank charged him? without interest. What should my
a) 23.95% creditor be willing to accept today if he
b) 22.30% discounts at 7% simple interest?
c) 21.95% a) P8264.46
d) 22.67% b) P7931.62
PROBLEM 29 c) P8162.98
A man borrowed P20, 000.00 from a d) P7900.00
local commercial bank which has a
simple interest 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 one year.
How much is the actual rate of interest?
PROBLEM 34
a) 23% d) 21%
b) 20% I owe P10,000 due at the end of 3 years
c) 19% without interest. What should my
creditor be willing to accept today if he
ENGINEERING ECONOMICS discounts at 7% simple interest?
a) P8264.46
 b) P7931.62 PROBLEM 38
c) P8162.98 If you borrowed P10000 from a bank
d) P7900.00 with 18% interest per annum, what is
PROBLEM 35 the total amount to be repaid at the end
of one year?
A merchant is offered a 5% discount for
a) P18100
immediate payment of a bill which is due
b) P81100
in 90 days. What is the largest simple
c) P11800
interest rate at which he could afford to
d) P10180
borrow in order to pay cash?
a) 21% PROBLEM 39
b) 18.2% What will be the future worth of money
c) 19.6% after 12 months, if the sum of P25000 is
d) 17.8% invested total at simple interest rate of
1% per year?
PROBLEM 36 a) P30000
A man borrowed P2,000 from a bank b) P29000
and promise to pay the amount for one c) P28000
year. He received only the amount of d) P27589
P1920 after the bank collected an PROBLEM 40
advance interest of P80.00. What is the
rate of discount and the rate of interest If you borrowed money from your friend
that the bank collected advance? with simple interest of 12%, find the
a) 4%; 4.17% present worth of P50000 which is due at
b) 3%; 3.17% the end of 7 months.
c) 4%; 4.71% a) P46200
d) 3%; 3.71% b) P44893
c) P46730
d) P47789

PROBLEM 41
You loan from a loan firm an amount of
P100000 with a rate of simple interest of
ENGINEERING ECONOMICS 20% but the interest was deducted from
the loan at the time the money was
borrowed. If at the end of one year, you
PROBLEM 37 have to pay the full amount of P100000,
what is the actual rate of interest?
P4000 is borrowed for 75 days at 16%
per annum simple interest. How much a) 25%
will be due at the end of 75 days? b) 27.5%
c) 30%
a) P4133.33
d) 18.8%
b) P4313.33
c) P4313.33
d) P4333.31 PROBLEM 42
A loan of P5000 is made for a period of The amount of P50, 000 was deposit in
15 months at a simple interest rate of the bank earning an interest of 7.5% per
15%. What future amount is due at the annum. Determine the total amount at
end of the loan period? the end of 5 years, if the principal and
a) P5637.50 interest end of 5 years, if the principal
b) P5900.90 and interest were not withdrawn during
c) P5937.50 the period?
d) P5842.54 a) P71, 781.47
COMPOUND INTEREST b) P72, 475.23
c) P70, 374.90
PROBLEM 43 d) P78, 536.34
John borrowed P50000.00 from the
bank at 25% compounded semi-
annually. What is the equivalent
effective rate of interest?
a) 25.56%
b) 26.56%
c) 21.66%
d) 12.56%

PROBLEM 47
What is the corresponding effective
interest rate of 18% compound semi-
ENGINEERING ECONOMY quarterly?
a) 19.25%
PROBLEM 44 b) 19.48%
Find the present worth of a future c) 18.46%
payment of P300, 000 to be made in 5 d) 18.95%
years with an interest rate of 8% per
annum. PROBLEM 48
a) P204,174.96 Find the present worth of a future
b) P200, 174.96 payment of P100, 000.00 to be made in
c) P240, 174.96 10 years with an interest of 12%
d) P217, 404.96 compounded quarterly.
a) P30,444.44
PROBLEM 45 b) P33,000.00
How long will it take money to double c) P30,655.68
itself if invested at 5% compounded d) P30,546.01
annually? PROBLEM 49
a) 7 years
b) 28 years In how many years is required for P2000
c) 14 years to increase by P3000 if the interest rate
d) 21 years at 12% compounded semi-annually.
a) 8
PROBLEM 46 b) 9
 c) 10 a) 3%
d) 7 b) 2.9%
c) 3.5%
PROBLEM 50 d) 4%
Compute the equivalent rate of 6%
compounded semi-annually to a rate
compounded quarterly.
a) 5.96%
b) 6.04%
c) 5.92% PROBLEM 54
d) 6.06% A merchant puts in his P2, 000.00 to a
small business for a period of 6 years.
With a given interest rate on the
investment of 15% per year,
ENGINEERING ECONOMICS compounded annually, how much will he
collect at the end of the 6th year?
PROBLEM 51
a) P4,400.00
If P5000.00 shall accumulate for 10 b) P4, 390.00
years at 8% compounded quarterly. c) P4, 200.00
Find the compound interest at the end of d) P4, 626.00
10 years.
PROBLEM 55
a) P6005.30
By the condition of a will, the sum of
b) P6000.00
P2000 is left to a girl to be held in trust
c) P6040.20
fund by her guardian until it amounts to
d) P6010.20
P50, 000, When will the girl received the
PROBLEM 52 money if the fund is invested at 8%
A sum of P1, 000.00 is invested now compounded quarterly?
and left for eight years, at which time the a) 7.98 years
principal is withdrawn. The interest has b) 10.34 years
accrued is left for another 8 years. If the c) 11.57 years
effective annual interest rate is 5%, what d) 10.45 years
will be the withdrawal amount at the end
PROBLEM 56
of the 16th year?
The amount of P12800 in 4 years at 5%
a) P705.45
compounded quarterly is ______.
b) P500.00
c) P774.00 a) P14, 785.34
d) P799.00 b) P15, 614.59
c) P16, 311.26
d) P15, 847.33
PROBLEM 53
P1,500.00 was deposited in a bank
account, 20 years ago. Today it is worth
P3000.00. Interest is paid semi-
annually. Determine the interest rate
paid on this account? ENGINEERING ECONOMY
 the purpose of buying shoes, what will
be the amount of money left in the bank
PROBLEM 57 after one year of his withdrawal?
Effective annual interest rate is 10%.
A man expects to receive P25, 000 in 8
years. How much is that money worth a) P1400
now considering interest at 8% b) P1055
compounded quarterly? c) P1550
d) P1450
a) P13, 859.12
b) P13, 958.33 PROBLEM 62
c) P13, 675.23 How much money must be invested on
d) P13, 265.83 Jan. 1, 1998 in order to accumulate
PROBLEM 58 P2000 on Jan. 1, 2003? Money is worth
6%.
At an interest rate of 10% compounded
annually how much will a deposit of a) P1494.52
P1500 be in 15 years. b) P12425.00
c) P1385.00
a) P6,100.00
d) P1585.00
b) P6, 234.09
c) P6,265.87 PROBLEM 63
d) P6,437.90 When will an amount be tripled with an
Problem 59 interest of 11.56%?
How many years will P100, 000 earned a) 12 years
a compound interest of P50, 000 if the b) 11 years
interest rate is 9% compounded c) 9 years
quarterly? d) 10 years
a) 3.25
b) 4.55
c) 5.86
d) 2.11

PROBLEM 60 ENGINEERING ECONOMY

The effective rate of 14% compounded
semi-annually is: PROBLEM 64
How much money must be invested on
a) 14.49% Jan. 1, 1998 in order to accumulate
b) 12.36% P2000 on Jan. 1, 2003? Money is worth
c) 14.94% 6%.
d) 14.88%
a) P1695.00
b) P1495.00
PROBLEM 61 c) P1295.00
d) P1595.00
A student plan to deposit P1500 in the
bank now and another P3000 for the
next 2 years. If he plans to withdraw
PROBLEM 65
P5000 3 years after his last deposit for
A man borrowed P1, 000, 000 at the 5 years, at which time it is expected to
interest rate of 12% per annum, have a scrap value of P2, 000.00 based
compounded quarterly. What is the on current prices. The machine will then
effective rate? be replaced with an exact duplicate. The
a) 3% company plans to establish a reserve
b) 13.2% funds to accumulate the capital needed
c) 12% to replace the machine. If an average
d) 12.55% annual rate of inflation of 3% is
anticipated, how much capital must be
PROBLEM 66 accumulated?
A mechanical Engineer wishes to a) P15, 030.00
accumulate a total of P10, 000.00 in a b) P18, 548.39
savings account at the end of 10 years. c) P13, 382.00
If the bank pays only 4% compounded d) P15, 386.00
quarterly, what should be the initial
Problem 70
deposit?
a) P4876.94 A firm borrows P2000 for 6 years at 8%.
b) P4995.86 At the end of 6 years, it renews the loan
c) P6716.53 for the amount due plus P2000 more for
d) P5890.11 2 years at 8%. What is the lump sum
PROBLEM 67 due?

Funds are deposited in a savings a) P6135.00

account at an interest rate of 8% per b) P5280.00
annum. What is the initial amount that c) P5254.00
must be deposited to yield a total P10,
d) P6035.00
000 in 10 years?
PROBLEM 71
a) P4894
b) P4530 What is the present worth of two P100
c) P6720 Payments at the end of the Third year
d) P4632 and Fourth year? The annual interest
PROBLEM 68 rate is 8%.
a) P153
Consider a deposit of P600.00, to be
b) P160
paid back in one year by P700.00. What
c) P162
are the conditions on the rate of interest,
d) P127
i% per year compounded annually, such
that the net present worth of the
investment is positive? Assume i ≤ o. PROBLEM 72
A deposit of P1000 is made in a bank
a) 0 ≤ i < 16.7% account that pays 8% interest
b) 0 ≤ i < 14.3% compounded annually. Approximately
c) 12.5% ≤ i < 14.3% how much money will be in the account
d) 16.7% ≤ i ≤ 100% after 10 years?
PROBLEM 69 a) P2160
b) P2345
A machine has been purchased and
c) P1860
installed at a total cost of P18, 000.00.
d) P1925
The machine will be retired at the end of
PROBLEM 73 Compare how much money will save or
lose on the transaction.
You need P4000 per year for four
a) You will pay P155.00 more than if
years to go to college. Your father
you borrowed from the bank.
invested P5000 in 7% account for b) You will save P55.00 by
your education when you were borrowing from your friend.
born. If you withdraw P4000 at the c) You will pay P85.00 more than if
end of your 17th, 18th, 19th and 20th you borrowed from the bank.
birthday, how much money will be d) You will pay P55.00 less than if
you borrowed from the bank.
left in the account at the end of the
PROBLEM 77
21st year?
P200, 000 was deposited on Jan. 1,
a) P2500 1988 at an interest rate of 24%
b) P3400 compounded semi-annually. How much
c) P1700 would the sum be on Jan. 1, 1993?
d) P4000 a) P421, 170
b) P521, 170
PROBLEM 74 c) P401, 170
An interest rate is quoted as being 7 ½ d) P621, 170
% compounded quarterly. What is the
effective annual interest rate?
a) 21.81% PROBLEM 78
b) 7.71% If P500, 000 is deposited at a rate of
c) 7.22% 11.25% compounded monthly,
d) 15.78% determine the compounded interest
after 7 years and 9 months.
PROBLEM 75 a) 690, 849
Fifteen years ago P1, 000.00 was b) 670, 258
deposited in a bank account, and today c) 680, 686
it is worth P2, 370.00. The bank pays an d) 660, 592
interest semi-annually. What was the
interest rate paid on this account? PROBLEM 79
a) 4.9% How much should you put into a 10%
b) 5.8% savings account in order to have P10,
c) 5.0% 000.00 in five years?
d) 3.8%
a) P3, 200.00
b) P7, 209.00
PROBLEM 76 c) P7, 000.00
You borrow P3, 500.00 for one year d) P6, 209.21
from a friend at an interest rate of 1.5%
per month instead of taking a loan from PROBLEM 80
a bank at a rate of 18% per year.
A company invest P10, 000 today to be A loan of P5000 is made for a period of
a repaid in 5 years in one lump sum at 15 months at a simple interest rate of
12% compounded annually. How much 15%. What future amount is due at the
profit in present day pesos is realized end of the loan period?
over 5 years? a) P5637.50
b) P5900.90
a) P5626
c) P5937.50
b) P7623
d) P5842.54
c) P3202
d) P5202
PROBLEM 85
PROBLEM 81 P500, 000 was deposited 20.15 years
ago at an interest rate of 7%
A bank is advertising 9.5% accounts
compounded semi-annually. How much
that yields 9.84% annually. How often is
is the sum now?
the interest compounded?
a) P1.4M
a) Monthly
b) P1.6M
b) Bi-monthly
c) P1.8M
c) Quarterly
d) P2.0M
d) Daily

PROBLEM 86
PROBLEM 82
Alexander Michael owes P25, 000 due
How long (years) will it take money to
in one year and P75, 000 due in 4
quadruple if it earns 7% compounded
years. He agrees to pay P50, 000 today
semi-annually?
and the balance in two years. How
a) 26.30 much must he pay at the end of 2 years
b) 40.30 if money is worth 5% compounded
c) 33.15 semi-annually?
d) 20.15
a) P103992.34
b) P395035.32
PROBLEM 83 c) P520130.30
d) P420146.10
P200, 000 was deposited at an interest
rate of 24% compounded semi-annually.
After how many years will the sum be PROBLEM 87
P621, 170?
If money is worth 5% compounded
a) 4 quarterly find the equated time for
b) 3 paying a loan of P150, 000 due in 1 year
c) 5 and P280, 000 due in 2 years.
d) 6
a) 1.70 years
b) 1.80 years
c) 1.66 years
d) 1.59 years

PROBLEM 84
PROBLEM 88 earnings of P400, 000.00 at the end of
every four (4) years and to continue until
For a loan acquired six years ago, a the 20th year of the deposit when the son
man paid out the amount of P75, 000.00 could get the P400, 000.00 earning and
the interest was computed at 18% the principal. What is the amount of
compounded annually. How much was money placed in the trust fund if
the borrowed amount? guaranteed interest is 16% per year?
a) P27782.36 a) P467, 980.20
b) P27067.45 b) P469, 342.32
c) P42324.20 c) P520, 435.38
d) P32951.54 d) P468, 081.15
PROBLEM 89
A man who won P300, 000 in a lottery PROBLEM 92
decided to place 50% of his winning in a
trust fund for the college education of If the sum P15, 000 is deposited in an
his son. If the money will earn 14% per account earning 4% per annum
year compounded quarterly, how much compounded quarterly, what will be the
will the man have at the end of 10 years deposited amount at the end of 5 years?
when his son will be starting his college a) P18302.85
education? b) P13820.25
a) P593, 888.96 c) P12490.75
b) P487, 224.68 d) P19020.55
c) P539, 868.35
d) P488, 847.26

PROBLEM 90
PROBLEM 93
A couple decided that for every child
that will be born to them they will place a The Phil. Society of Mechanical
deposit in the bank so that on the child’s Engineers is planning to put up its
18th birthday, the child will receive the own building. Two proposals being
amount of P300, 000.00. If the bank will
considered are:
pay an interest of 18% compounded
yearly, how much deposit will the couple A) The construction of the
to have to make on the birth of a child to building now to cost P400,
them?
000.00.
a) 15, 249.13 B) The construction of a smaller
b) 12, 492.18 building now, to cost P300,
c) 14, 394.28
000 and at the end of 5
d) 16, 928.58
years, an extension to be
added to the cost P200, 000.
PROBLEM 91 Which proposal is more
economical, if interest rate is 20%,
A rich man put up a trust fund in the
bank with instructions to give his son the
depreciation to be neglected and a) Semi-annually
by how much? b) Compounded monthly
c) Quarterly
a) P20, 630.55
d) Yearly
b) P19, 760.55
c) P19, 624.50
d) P21, 540.69 PROBLEM 97
An additional investment of P20, 000 will
be required at the end of the year. The
PROBLEM 94 project would terminate at the end of the
The sum of P26, 000 was deposited in a fifth year, and his assets are estimated
fund earning interest at 8% per annum to have a salvage value of P25, 000 at
compounded quarterly. What was the that time. Is this a good investment?
principal in the fund at the end of 3 Support your answer.
years? a) This is not a good investment,
a) P33, 897.33 the rate is smaller than 6%.
b) P32, 974.29 b) This is good investment, the rate
c) P34, 546.43 is bigger than 6%
d) P36, 342.80 c) This is good investment, the rate
is less than 6%
d) None of these

PROBLEM 98
PROBLEM 95 For instance you have P10, 000
Mr. W borrowed P2, 000.00 Mr. Y on invested in your savings bank account, it
June 1, 1928 and P500 on June 1, is earning 12% interest compounded
1930, agreeing that money is worth 5% annually. Determine how many years
compounded annually. Mr. W paid P500 your money will be double.
on June 1, 1931, P400 on June, 1932 a) 6.13
and P700 on June 1, 1933. What b) 6.20
additional sum should Mr. W pay on c) 6.12
June 1, 1936 to discharge all the d) 7.10
remaining liability?
a) P1780.29
PROBLEM 99
b) P1690.28
c) P1754.53 What is the value of a bank account at
d) P1896.77 the end of 25 years if the initial deposit
is P1000.00? The interest rate is 7% per
annum. Assume that there is no further
PROBLEM 96 deposit made after the first year.
Which method is the best for an investor a) P6554.40
to invest at 5% compounded semi- b) P5783.25
annually or 5% compounded monthly? c) P5342.60
Prove your answer by mathematical d) P5427.43
solution.
PROBLEM 100 b) P3592.30
A man borrows moneys from a bank
c) P4285.70
which uses a simple discount rate of d) P7841.11
14%. He signs a promissory note
promising to pay P500.00 per month at
the end of 4th, 6th and 7th months PROBLEM 103
respectively. Determines the amount of How long it will take P5.00 to be
money that he received from the bank.
four times its value if invested at
a) P2504.70 the rate of 7% compounded semi-
b) P2210.60 annually? What is the effective
c) P1359.58
rate of interest?
d) P1403.68
a) 47 years ; 7.40%
PROBLEM 101 b) 45 years ; 8.10%
c) 41 years ; 7.12%
The present worth of several d) 50 years ; 9.02%
future cash payments may be
defined as the sum of the values
of the future payments may be PROBLEM 104
defined as the sum of the values A. If P25, 000 is invested at 8%
of the future payments discounted interest compounded quarterly,
at a given rate for the how many years will it take for
corresponding period to the this amount to accumulate P45,
present. Find the present value of 000?
installment payments if P1000 a) 7.5 years
now, P2000 at the end of the first b) 8.5 years
years, P3000 at the end of the 2nd c) 8 years
year, P4000 at the fourth year, if d) 9.8 years
money is worth 10% compounded B. Find the effective interest rate
annually. of the following:
a) P11, 717.85 1) 12% compounded semi-
b) P18, 398. 25 annually
c) P17, 117.45 a) 13.30%
d) P10, 771.35 b) 12.90%
c) 12.36%
d) 13.58%
PROBLEM 102 2) 12% compounded quarterly
Accumulate P300 for 9 years at a) 12.80%
6% compounded quarterly. What b) 12.36%
is the compound interest earned? c) 13.25%
d) 13.29%
a) P2127.42 3) 12% compounded monthly
 a) 12.55% c) 8.090%
b) 12.90% d) 9.020%
c) 13.10%
d) 13.24% PROBLEM 108
1) In how may years will a sum of
PROBLEM 105 money triple itself at 12% interest?
a) 9.6 years
Suppose a businessman is considering b) 8.35 years
the purchase of a business machine that c) 10.2 years
is expected to be obsolete in five years. d) 9.20 years
The machine is worth P100, 000. The 2) In the formula F = P (1+ i/6)^6n in
prevailing rate of interest is 15%. what length of time is the interest
Suppose he made an estimate of hi compounded?
gross yearly income as follows: a) 3 months
Year Income b) 2 months
c) 4 months
1 P20000 d) 5 months
2 P25000 3) In the formula F = P (1+i)^n, what is
3 P35000 the factor (1+i)^n called?
4 P30000 a) Single payment
5 P28000 b) Three payments
Total= P138000 c) Double payments
Is this business profitable? d) Four payments
a) Profitable
b) Not Profitable
c) Both PROBLEM 109
d) None of these Carlos Espiritu has P13, 760 in cash
and he would like to invest it in
PROBLEM 106 business. His estimates of the year by
year receipts and disbursements for all
How long will it take money to triple itself purposes are shown in the tabulation
if invested at 8% compounded annually? below.
a) 20 Year Receipts Disbursements
b) 16
c) 17 0 0 -P13.760
d) 15 4 P5000 +1000
5 P6200 +1200
PROBLEM 107
6 P7500 +1500
Five years ago you paid P34000.00 for
7 P8800 +1800
a house. If you sold it today for P50,
000.00, what would be your annual rate He estimates that is equipment will have
of appreciation? a salvage value of P2, 000 at the end of
useful life. Find the rate of return of the
a) 8.018%
prospective investment.
b) 9.027%
 a) 11.10% P179, 000. Compute the value of
b) 12.20% the single payment amount factor.
c) 9.31%
d) 10.11% a) 1.492
b) 1.6231
PROBLEM 110 c) 0.9362
d) 0.8472
Two proposals are being considered by
a company for building a bottling plant
these are: PROBLEM 113
Proposal A: If a sum of money triples in a
The construction of a building now certain period of time at a given
costing P500, 000 rate of interest, compute the value
Proposal B: of the single payment present
worth factor.
The construction of smaller building now
costing P400, 000 and an additional a) 0.333
wing costing P200, 000 at the end of 10 b) 3
years. c) 0.292
Assuming depreciation to be negligible d) 1.962
which of the two proposals is more
economical by how much if interest is at
6%. PROBLEM 114
a) A, P11, 678.96 If the single payment amount
b) B, P22, 469.42 factor for a period of 5 years is
c) A, P16, 246.42 1.33822. What is the nearest
d) B, P18, 246.28
value of the interest rate?

PROBLEM 111 a) 8%
b) 7%
Compute the value of P100, 000 5 c) 5.10%
years ago if the single payment d) 6%
present worth factor is 0.74726.
a) P75, 843 PROBLEM 115
b) P74, 726
c) P75, 423 If the single payment present
d) P81, 521 worth factor for a period of 8 years
is equal to 0.58201, compute the
nearest value of the rate of
PROBLEM 112 interest for that period.
Ten years ago the value of money a) 6%
is P120, 000 and now it is worth b) 7%
 c) 6.5% I owe P10000 due at the end of 3 years
d) 8% without interest. What should my
creditor be willing to accept today if he
discounts at 7% compounded annually?
PROBLEM 116 a) P8, 162.98
Is worth 8% compounded b) P8, 264.46
c) P7, 900
quarterly, compute the single
d) P7, 162.48
payment amount factor for a
PROBLEM 121
period of 6 years.
P500, 000 was deposited at an interest
a) 1.60844 of 6% compounded quarterly. Compute
b) 0.62172 the compound interest after 4 years and
c) 1.70241 9 months.
d) 0.53162 a) 163475.37
b) 178362.37
c) 158270.37
PROBLEM 117 d) 183327.37
What is the difference of the amount 3
years from now a 10% simple interest
PROBLEM 122
and 10% compound interest per year?
P200, 000 was deposited in a rural bank
a) P155
at an interest of 4% compounded semi-
b) P100
annually. Compute worth of the deposit
c) Same
after 5 years and 6 months.
d) P50
a) P248, 674.86
b) P245, 234.68
PROBLEM 118 c) P345, 234.68
d) P421, 622.63
If the effective interest rate is equal to
19.56%, compute the nominal rate if
money is compounded monthly. PROBLEM 123
a) 18% P200, 000 was deposited for a period of
b) 19% 4 years and 6 months and the bears on
c) 17.9% interest of P85, 649.25. What is the rate
d) 19.2% of interest if it is compounded quarterly?
PROBLEM 119 a) 8%
Find the discount if P2000 is discounted b) 6%
for 6 months at 8% compounded c) 7%
quarterly. d) 5%

a)
P76.92
b)
P80.00 PROBLEM 124
c)
P77.66
P300, 000 was deposited at a rate of
d)
P78.42
interest of 6% compounded monthly.
PROBLEM 120
After how many years will the compound a) 70 months
interest be P129, 613.28? b) 64 months
c) 55 months
a) 6
d) 42 months
b) 5
c) 8
d) 10 PROBLEM 129
PROBLEM 125
In the formula P=F (1+i)^-n the
A certain amount was deposited 5 years factor (1+i)^-n is called the
and 9 months ago at an interest of 8%
compounded quarterly. If the sum now a) Sinking fund factor
is P315, 379.85, How much was the b) Single payment present
amount deposited? worth factor
a) P200, 000 c) Single payment compound a
b) P180, 000 mount factor
c) P240, 000 d) Capital recovery factor
d) P260, 000

PROBLEM 130
PROBLEM 126
For some interest rate “i” and some
If the rate of interest is 12%
number of interest periods “n”, the
compounded annually, find the
uniform series capital recovery factor is
equivalent rate of interest if it is
0.0862 and the sinking fund factor is
compounded quarterly.
0.0416. Compute the value of the
a) 11.49% interest rate “i”.
b) 15.28%
a) 4.46%
c) 8.53%
b) 5.52%
d) 13.32%
c) 6.54%
PROBLEM 127 d) 8.53%
How long in years will it take money to PROBLEM 131
quadruple if it earns 8% compounded
A sum of money “x” pesos will be
quarterly?
received six years from now. At 5%
a) 17.5 annual interest the present worth now of
b) 20.5 “x” is P60, 000. At the same rate of
c) 19.5 interest, what would be the value of “x”
d) 18.5 10 years from now?
a) P97, 733.68
b) P96, 422.64
c) P92, 364.34
d) P88, 412.42
PROBLEM 128 PROBLEM 132
How many months at an interest rate of Find the present worth of a furniture
10% per month does money have to be payment of P100, 000 to be made is 5
invested before it will double in value?
years with an interest of 12% a) P5,550
compounded quarterly. b) P6,000
c) P5, 000
a) P45,867.67
d) P4,550
b) P87,645.23
c) P23, 234.76
d) P55, 367.58 PROBLEM 137
PROBLEM 133
If P1000 becomes 1126.49 after 4 years
An initial savings deposit of P80, 000 in when invested at a certain nominal rate
a certain bank earns 6% interest per of interest compounded semi-annually,
annum compounded monthly. If the determine the nominal rate and the
earnings from the deposit are subject to corresponding effective rate.
a 20% tax what would be the net value
a) 3% and 3.02%
of the deposit be after three quarters?
b) 4.29% and 4.32%
a) P95324.95 c) 2.30% and 2.76%
b) P82938.28 d) 3.97% and 3.95%
c) P68743.24 PROBLEM 138
d) P56244.75
A man borrowed P20, 000 from a local
PROBLEM 134
commercial bank which has a simple
Accumulate P3000 for 9 years at 6% interest of 16% but the interest is to be
compounded quarterly. Compute the deducted from the loan at the time that
compound interest earned. the money was borrowed, and the loan
is payable at the end of one year. How
a) 3920.28
much is the actual rate of interest?
b) 2127.42
c) 3048.15 a) 19%
d) 1309.21 b) 25%
c) 15%
d) 17%
PROBLEM 135 PROBLEM 139
Find the nominal rate which if
Convert 12% compounded semi-
compounded quarterly is equivalent to
annually to a rate compounded
6.5% compounded semi-annually.
quarterly.
a) 4.389%
a) 19.23% compounded quarterly
b) 6.448%
b) 23.56% compounded quarterly
c) 5.308%
c) 14.67% compounded quarterly
d) 7.245%
d) 11.83% compounded quarterly
PROBLEM 136
On his sixth birthday a boy is left an
PROBLEM 140
inheritance. The inheritance will be paid
in a lump sum of P10, 000 on his 21st Compute the effective annual interest
birthday. What is the present value of rate on a loan if the nominal interest rate
the inheritance as of the boy’s sixth is 16% per annum compounded
birthday, if the inheritance is quarterly.
compounded annually?
a) 16.24%
 b) 16.98% company costing P60, 000. If money is
c) 16.35% worth 16% by the company, how much
d) 16.18% money will be needed to supplement the
sinking fund?

PROBLEM 141 a) P8436.36

b) P9789.42
A man deposit P2000 in the bank today c) P5432.40
the rate of 4% per annum. After two d) P4842.60
years he deposits another P4000. In five
years he will withdraw P6000. How
much money does he have on the 6th
year?
PROBLEM 144
a) P970.07
b) P890.28 Mr. Juan de la Cruz borrowed P1000.00
c) P990.38 and was able to sign a promissory note
d) P870.90 that he would pay P2032.79 after 4
PROBLEM 142 year. How much the nominal rate of
interest and the corresponding effective
A couple borrowed P4000 from a rate if money is compounded bi-
lending company for 6 years at 12%. At monthly.
the end of 6 years, it renews the loan for
the amount due plus P4000 more for 3 a) 16%, 16.52%
years at 12%. What is the lump sum b) 18%, 19.40%
due? c) 17%, 17.4%
d) 15%, 15.6%
a) P14, 842.40 PROBLEM 145
b) P16, 712.03
c) P12, 316.40 Determine the effective interest rate of
d) P15, 382.60 P1.00 for one year compounded semi-
annually at a nominal rate of 6%?

PROBLEM 143 a) 6.20%

A small business company is preparing
a schedule of funds to form a sinking
fund for future expansion. The schedule
of funds are as follows:
Present year n ----- 8000
n +1 ----- 7000
n +2 ----- 6000
n +3 ----- 5000
n +4 ----- 4000
By the end of the 5th year, the company
will purchase an equipment needed for
the improvement and expansion of the
b) 6.09%
c) 7.02%
d) 5.90%
PROBLEM 146
A manufacturing firm contemplates
retiring an existing machine at the end
of 1982. The new machine to replace
the existing one will have an estimated
cost of P10, 000.00. This expense will
be partially defrayed by sale of old
machine as a scrap for P750.00. To
accumulate the balance of required
capital, the firm will deposit the following
sums in an account earning interest rate
of 5% compounded annually.
 P1500 at the end of 1779 a) 12% compounded monthly
b) 12% compounded semi-annually
P2000 at the end of 1981
c) 12% compounded bi-monthly
What cash disbursement will be d) 12% compounded daily
necessary at the end of 1982 to PROBLEM 150
purchase the new machine?
A business wants to have P500, 000
a) P4830.58 four from now. What amount should he
b) P3952.60 invest now if it will earn interest of 6%
c) P3760.00 compounded quarterly for the first 2
d) P4583.31 years and 8% compounded semi-
PROBLEM 147 annually during the next 2 years?

Compute the effective rate of interest a) P379, 409.60

corresponding to each of the following b) P561, 895.55
interest rate. If you invest your money, c) P420, 539.68
which would you prefer? d) P510, 485.45
PROBLEM 151
a) 12% compounded quarterly
b) 12% compounded monthly A business firm contemplating the
c) 12% compounded bi-monthly installation of labor saving machinery
d) 12% compounded daily has a choice between two different
PROBLEM 148 models. Machine A will cost P36,
500.00, while Machine B will cost P36,
If you invest P2000 now it will become 300.00. The repairs required for each
P6000 at the end of 4 years, determine machine are as follows:
the nominal rate of interest and the
corresponding effective rates if the Machine A:
interest is compounded:
P1, 500 at the end of 5th year
1) Semi-annually P2, 000 at the end of 10th year
a) 29.4%; 31.6%
b) 28.90%; 35.1% Machine B:
c) 30.1%; 32.60% P3, 800 at the end of 9th year
d) 29.78%; 40.20%
2) Quarterly The machines are alike in all other
a) 28.4%; 31.6% aspects. If this firm is earning 7% return
b) 30.0%; 33.25% on its capital, which machine should be
c) 29.23%; 32.45% purchase? And what is the net savings.
d) 45.11%; 29.80% a) Machine A; P318.00
3) Bi-monthly b) Machine B; P219.00
a) 29.5%; 34.12% c) Machine A; P420.00
b) 28.08%; 31.6% d) Machine B; P516.00
c) 29.12%; 31.89%
d) 33.1%; 33.27%
PROBLEM 149 PROBLEM 152

Which is better to invest your A conventional reinforced concrete

structure can be built for the service
money at rate of 12%?
contemplated at a cost of P18, 000.00
but an additional building will be b) P379.76
necessary for storage 15 years hence c) P339.81
at a cost of P10, 000.00. S prestressed d) P412.53
concrete structure can be built at the PROBLEM 155
present time which will furnish adequate
space for the entire period of planning, If P10, 000 is borrowed now at 6%
at a cost of P25, 000.00. Both types of interest, how much will remain to be
structures are of permanent construction paid after a P3, 000 payment is made
so that depreciation may be neglected in four years now?
a comparison of costs. With interest at a) P9624.77
6%, show which the more economical b) P8424.64
plan for the construction. And how much c) P7844.74
is the savings. d) P6896.24
a) Convertional structure, P2827.00 PROBLEM 156
b) Prestressed structure, P3462.00 A businessman invest P100, 000 right
c) Conventional structure, P1842.00 now. He then received two payments
d) Prestressed structure, P1684.00 P109460.00 one at the end of 3 years
PROBLEM 153 and one at the end of the 6th year.
A businessman invested P1000 and Calculate the rate of return of the
after 4 years it becomes P1, 608.44 investment.
when he invested at a certain rate of a) 20%
interest compounded bi-monthly. b) 18%
Determine the nominal rate and the c) 12%
corresponding effective rate. d) 15%
a) 12%; 12.62%
b) 12%; 13.40%
c) 14%; 14.6%
d) 15%; 15.8% PROBLEM 157
PROBLEM 154 The VISA CREDIT CARD charges 2%
Mr. Abella owes Mr. Divinagracia the interest per month on the unpaid
following obligations. balance for the purchases made on this
card. Compute the effective rate of
1) P100 due at the end of 10 years interest.
2) P200 due at the end of 5 years with
accumulated from to-day at 5% a) 26.82%
compounded semi-annually. b) 24.14%
3) P300 due at the end of 4 years with c) 19.83%
accumulated interest from to-day at d) 18.42%
4% compounded annually PROBLEM 158
Mr. Abella will be allowed to discharge
A man purchase government bonds at
his obligations by two equal payments at
P750 each which mature in 10 years
the ends of the 3rd and 6th years.
and have a face value of P1000 at the
Divinagracia admits that money is worth
end of 10 years. Determine the average
6% compounded semi-annually, what
nominal interest rate earned by the
would be Mr. Abella’s equal payments?
a) P439.90
purchase price of P750 assuming annum. Determine the total amount at
nominal compounding. the end of 5 years, if the principal and
interest were not withdrawn during the
a) 2.90%
period?
b) 2.98%
c) 2.92% a) P71, 781.47
d) 3.10% b) P72, 475.23
PROBLEM 159 c) P70, 374.90
d) P78, 536. 34
How long will it take money to double
PROBLEM 164
itself if invested at 5% compounded
annually? What is the corresponding effective rate
of 18% compounded semi-quarterly?
a) 7 years
b) 28 years a) 19.25%
c) 14 years b) 19.48%
d) 21 years c) 18.46%
PROBLEM 160 d) 18.95%
PROBLEM 165
If P5000 shall accumulate for 10 years
In how many years is required for P2000
at 8% compounded quarterly the
ti increase by P3000 if interest at 12%
compound interest at the end of 10
compounded semi-annually?
years is:
a) 8
a) P6040 b) 9
b) P6400 c) 10
c) P60404 d) 7
d) P64040 PROBLEM 166
PROBLEM 161
Find the present worth of a future
Find the compound amount and interest payment of P100, 000 to be made in 10
if P2500 is invested at 8% compounded years with an interest of 12%
quarterly for 5 years and 6 months. compounded quarterly.

a) P7,2000.55 a) P30, 444.44

b) P3864.95 b) P33, 000.00
c) P3864.95 c) P30, 655.68
d) P3975.25 d) P30, 546.01
PROBLEM 162 PROBLEM 167
An amount of P1000 becomes Find the nominal rate which if converted
P1608.44 after 4 years compounded bi- quarterly could be used instead of 12%
monthly. Find the nominal interest. compounded semi-annually.

a) 12.62% a) 14.02%
b) 12% b) 21.34%
c) 14.64% c) 11.29%
d) 15% d) 11.83%
PROBLEM 163 PROBLEM 168
The amount of P50000 was deposited in
the bank earning an interest of 7.5% per
What nominal rate, compounded semi- a) 7.42 years
annually, yields the same amount as b) 7.25 years
16% compounded quarterly? c) 6.8 years
d) 7 years
a) 16.64%
b) 16.18%
PROBLEM 173
c) 16.32% What is the effective rate corresponding
d) 16% to 16% compounded daily? Take 1
year=360 days.
a) 16.78%
b) 16.5%
c) 17.35%
PROBLEM 169 d) 17.84%
What rate of interest compounded PROBLEM 173-a
annually is the same as the rate of Which of these gives the lowest
interest of 8% compounded quarterly? effective rate of interest.
a) 6.48% a) 12.35% compounded annually
b) 8.42% b) 11.9% compounded semi-
c) 8.24% annually
d) 6.88% c) 12.2% compounded quarterly
PROBLEM170 d) 11.6% compounded monthly
Find the difference between simple
interest and compound interest on a
savings deposit of Fifty thousand pesos
at 10 percent per annum for 3 years.
a) P1, 550
b) P2, 120
c) P1, 250
d) P1, 830
PROBLEM 171
A man expects to receive P20, 000 in 10
years. How much is that money worth
now considering interest at 6%
compounded quarterly?
a) P11025.25
b) P1052.52
c) P12520.52
d) P13250.25
PROBLEM 172
By the conditions of a will, the sum of
P25, 000 is left to a girl to be held in a
trust fund by her guardian until it amount
to P45, 000. When will the girl receive
the money if the fund is invested at 8%
compounded quarterly?