ENGINEERING ECONOMICS 1 LECTURE
1. Determine the exact simple interest on P5,500 for the
period from January 10, 1996 to October 28, 1996 at
11% interest.
2. A man borrowed P4000 for 75 days at 16% per
annum interest rate. How much will be due at the end
of 75 days?
3. If the loan was for 15 months at 16.8% interest a year
and the repayment on a loan was P12,100.00, how
much was the principal?
A. P8,500.00 C. P9,500.00
B. P10,000.00 D. 10,500.00
4. Jilmer borrowed P2000 from Edirose and agreed to
pay the loan at the end of one year. Edirose
discounted the loan and give P1950 in cash.
Determine the rate of discount.
5. A handsome Engineer named Jervin borrowed
P50,000 from Paulo and agreed to pay the loan at the
end of 9 months. Paulo discounted the loan and gave
him P40,000 in cash. What was the rate of discount,
rate of interest and the rate of interest in one year?
6. A deposit of P110,000 was made for 31 days. The net
interest after deducting 20% withholding tax if
P890.36. Find the rate of return annually.
7. Reden put P5000 into an empty savings account with
a nominal interest rate of 5%. No other contributions
are made to the account. With monthly compounding,
how much interest will have been earned after five
years?
8. An amount of P25,000 is invested at 4.5% continuous
compounding. Find the amount after 10 years.
9. Determine how long will it take money to double
itself if invested at 6% compounded semi-annually.
10. What is the effective rate equivalent of 12%
compounded quarterly?
11. A bank is advertising 9% accounts that yield 9.344%
annually. How often is the interest compounded?
A. Daily C. Bimonthly
B. Monthly D. Quarterly
12. What nominal rate compounded quarterly could be
used instead for 15% compounded semi-annually?
13. Suppose a Montero car presently worth $8200
depreciates 20% per year. About how much will it be
worth 2 years and 3 months from now?
14. Engr. Ara deposit $1800 into a 9% account today
compounded monthly. At the end of three years, he
will deposit another $3000. In five years, he plan a
$4000 purchase. How much is left in the account one
year after the purchase?
15. Engr. Saturnino 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?
16. A businessman named Almar bought a lot
P1,000,000 if paid in cash. On the installment basis,
he paid a downpayment of P200,000; P300,000 at the
end of one year; P400,000 at the end of three years
and a final payment at the end of five years. What
was the final payment if the interest was 20%?
17. A man wishes his son to receive P500,000 ten years
from now. What amount should he invest now if it
will earn interest of 12% compounded annually
during the first five years and 15% compounded
quarterly during the next 5 years?
18. What is the future worth of my P100,000 after 5
years if I invest today at a rate of 12% compounded
annually. Inflation rate is 8% per year. What is the
actual effective rate given to the account?
19. An investment currently costs 18,000. If the inflation
rate is 6% and the effective annual return on
investment is 15%, approximately how long will it
take for the investment’s future value to reach
60,000?
20. How much money will you invest today in order to
withdraw P2000 annually for 10 years if the interest
rate is 9%?
21. Christian Lana wants to buy a car by paying a down
payment of P100,000 and the balance to be paid
monthly for 5 years at 18% compounded monthly.
What is the monthly payment if the cost of the car is
P500,000?
22. Sheryl obtains a loan of P1 Million at the rate of 12%
compounded semi-annually in order to build a house,
how much must he pay monthly to amortize the loan
within a period of ten years?
23. Gary needs P12000 immediately as downpayment on
a new home. Suppose he can borrow this money from
his insurance company. He must repay the loan in
equal payments every six months over the next eight
years. The nominal interest rate being charge is 7%
compounded continuously. What is the amount of
each payment?
24. Mr. Johnson borrows P90000 at 12% effective annual
interest. He must pay back the loan over 25 years
with uniform monthly payments due on the first day
of each month. Approximately what amount does Mr.
Johnson pay each month?
25. A farmer bought a tractor costing P25,000 payable in
10 semi-annual payments starting at the beginning of
each period. If the interest rate is 26% compounded
semi-annually, determine the amount of each
installment.
26. Vienne borrowed P100,000 at 11% compounded
annually for 12 years. And promised to pay the
amount starting 5 years from now. Find the annual
payment.
27. A father invests P10,000 now for the college
education of his newborn son. If the fund earns 14%
effective, how much will the son get each year
starting from his 16th to the 20th birthday?
ENGINEERING ECONOMICS 1 LECTURE

28. Permanent mineral rights on a parcel of land are

purchased for an initial lump-sum payment of
P100,000. Profits from mining activities are P12,000
each year, and these profits are expected to continue
indefinitely. What approximate interest rate is being
earned on the initial investment?
29. How much money must you deposit today in an
account earning 10% compounded annually so that
you can withdraw P25,000 yearly indefinitely starting
at the end of the 10th year?
30. The balance sheet of Allied Company is as follows:
CASH: P10,000
RECEIVABLES: P12000
INVENTORY: P7000
CAPITAL EQUIPMENT: P20,000
PAYABLES: P17,000
NOTES DUE: P6000
LONG TERM DEBT: P3000
OWNER’S EQUITY = P23000
31. A manufacturer of sports equipment produces tennis
rackets for which there is a demand of 200/mo. The
production setup cost for each batch of rackets is
$300. In addition, the inventory carrying cost for
each racket is $24/yr. Using the EOQ model, which is
most nearly the best production batch size for the
rackets?
32. The volatility of a stock is found to be 1.5 times the
stock market average. If the risk premium for buying
stocks averages 8.3% and the present treasury bill
rate (assumed to be risk free) is 7%, what is most
nearly the expected return on the stock?
33. Tops Corporation’s gross margin is 45% of sales.
Operating expenses such as sales and administration
are 15% of sales. Tops is in a 50% tax bracket. What
percent of sales is their profit after taxes?