Republic of the Philippines
BATANGAS STATE UNIVERSITY
The National Engineering University
Alangilan Campus
Golden Country Homes, Alangilan Batangas City, Batangas, Philippines 4200
Tel Nos.: (+63 43) 425-0139 local 2121 / 2221
E-mail Address: ceafa@g.batstate-u.edu.ph | Website Address: http://www.batstate-u.edu.ph
College of Engineering - Department of Instrumentations and Controls Engineering
ENGG 404 – Engineering Economics
Problem Set I
1. What lump-sum amount of interest will be paid on a $10,000 loan that was made on August
1, 2012, and repaid on November 1, 2016, with ordinary simple interest at 10% per year?
2. You have just invested a one-time amount of $5,000 in a stock-based mutual fund. This
fund should earn (on average) 9% per year over a long period of time. How much will your
investment be worth in 35 years?
3. A 12-cylinder heavy-duty diesel engine will have a guaranteed residual value of $1,000 in
five years. Today (year 0) the equivalent worth of this engine is how much if the interest
rate is 9% per year?
4. You borrow $500 from a family member and agree to pay it back in six months. Because
you are part of the family, you are only being charged simple interest at the rate of 0.5%
per month. How much will you owe after six months? How much is the interest?
5. Jonathan borrowed $10,000 at 6% annual compound interest. He agreed to repay the loan
with five equal annual payments of $2,374 at end-of-years 1–5. How much of the annual
payment is interest, and how much principal is there in each annual payment?
6. You just inherited $10,000. While you plan to squander some of it away, how much should
you deposit in an account earning 5% interest per year if you’d like to have $10,000 in the
account in 10 years?
7. What is the present equivalent of $18,000 to be received in 15 years when the interest rate
is 7% per year?
8. How long does it take (to the nearest whole year) for $1,000 to quadruple in value when
the interest rate is 15% per year?
9. One of life’s great lessons is to start early and save all the money you can! If you save P5
today and P5 each and every day thereafter until you are 60 years old (say P1825 per year
for 35 years), how much money will you accumulate if the annual interest rate is 7%?
10. You can buy a machine for $100,000 that will produce a net income, after operating
expenses, of $10,000 per year. If you plan to keep the machine for 4 years, what must the
market (resale) value be at the end of 4 years to justify the investment? You must make a
15% annual return on your investment.
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