ENGINEERING

ECONOMY

PROBLEMS WITH
COMPLETE SOLUTIONS
 PROBLEM NO. 1
$ 2,900.00 IS BORROWED FOR 29
DAYS AT 29% PER ANNUM SIMPLE
INTEREST. HOW MUCH WILL BE
DUE AT THE END OF 29 DAYS?

a. $ 3,5078.265324
b. $ 4,2135.782511
c. $ 2,967.747222
d. $ 4,669.782033
 SOLUTION NO. 1
GIVEN :
P = $ 2,900.00
𝒊 = 29%
𝒅 = 29 DAYS

FORMULA :
F = P 𝟏 + 𝒊𝒏
𝒅
𝒏 =
𝟑𝟔𝟎
 SOLUTION NO. 1
SOLUTION :
FIRST, WE NEED TO SOLVE FOR 𝒏 :
𝒅 𝟐𝟗
𝒏 = =
𝟑𝟔𝟎 𝟑𝟔𝟎

NOW, WE CAN SOLVE FOR F. THEN,

SUBSTITUTE THE VALUE OF 𝒏 :
F = P 𝟏 + 𝒊𝒏
𝟐𝟗
F = $ 2,900.00 [1+( 29%)( )]
𝟑𝟔𝟎

𝟐𝟗
SOLVE ( 29%)( )
𝟑𝟔𝟎
𝟖𝟒𝟏
F = $ 2,900.00 𝟏 + ( )
𝟑𝟔𝟎𝟎𝟎
 SOLUTION NO. 1
𝟖𝟒𝟏
F = $ 2,900.00
𝟏+( )
𝟑𝟔𝟎𝟎𝟎
SOLVE INSIDE THE BRACKETS
F = $ 2,900.00 𝟏. 𝟎𝟐𝟑𝟑𝟔𝟏𝟏𝟏𝟏
MULTIPLY IT

ANSWER :
F = $ 2,967.747222
 PROBLEM NO. 2
$ 5,681.00 IS BORROWED FOR 90
DAYS AT 56.21% PER ANNUM
SIMPLE INTEREST. HOW MUCH
WILL BE DUE AT THE END OF 90
DAYS?

a. $ 6,479.322525
b. $ 5,631.123568
c. $ 5,569.125980
d. $ 4,332.201268
 SOLUTION NO. 2
GIVEN :
P = $ 5,681.00
𝒊 = 56.21%
𝒅 = 90 DAYS

FORMULA :
F = P 𝟏 + 𝒊𝒏
𝒅
𝒏 =
𝟑𝟔𝟎
 SOLUTION NO. 2
SOLUTION :
FIRST, WE NEED TO SOLVE FOR 𝒏 :
𝒅 𝟗𝟎
𝒏 = =
𝟑𝟔𝟎 𝟑𝟔𝟎

NOW, WE CAN SOLVE FOR F. THEN,

SUBSTITUTE THE VALUE OF 𝒏 :
F = P 𝟏 + 𝒊𝒏
𝟗𝟎
F = $ 5,681.00 [1+( 56.21%)( )]
𝟑𝟔𝟎

𝟗𝟎
SOLVE ( 56.21%)( )
𝟑𝟔𝟎
F = $ 5,681.00 𝟏 + (𝟎. 𝟏𝟒𝟎𝟓𝟐𝟓)
 SOLUTION NO. 2
F = $ 5,681.00 𝟏 + (𝟎. 𝟏𝟒𝟎𝟓𝟐𝟓)
SOLVE INSIDE THE BRACKETS
F = $ 5,681.00 𝟏. 𝟏𝟒𝟎𝟓𝟐𝟓
MULTIPLY IT

ANSWER
F = $ 6,479.322525
 PROBLEM NO. 3
ENGR. MA. NICOLE DEPOSITED TO
THE BANK WORTH $ 250,000.00 WAS
MADE FOR 56 DAY. THE NET
INTEREST WAS $ 2,107.56 AFTER
DEDUCTING THE 35% TAX. FIND THE
RATE OF RETURN ANNUALLY.

a. 0.0135
b. 3.4563%
c. 0.0265
d. 8.3376%
 SOLUTION NO. 3
GIVEN :
P = $ 250,000.00
NET INTEREST = $ 2,107.56
𝒅 = 56 DAYS
TAX = 35%

FORMULA :
NET OF INTEREST = 𝟏 − 𝑻𝑨𝑿 × 𝑰
𝒅
𝑰 = 𝐏𝐢
𝟑𝟔𝟎
 SOLUTION NO. 3
SOLUTION :
SOLVE FOR “I” BEFORE DEDUCTING THE TAX. LET
X=I
NET OF INTEREST = 𝟏 − 𝑻𝑨𝑿 × 𝑰
$ 2,107.56 = 𝟏 − 𝟑𝟓% × 𝑰

COMPUTE : 1 - 35% = 65%

$ 2,107.56 = 𝟔𝟓% × 𝑰

DIVIDE 65% :
$ 2,107.56 𝟔𝟓%×𝑰
=
𝟔𝟓% 𝟔𝟓%

CANCEL 65% THEN SOLVE :

$ 2,107.56 𝟏𝟔,𝟐𝟏𝟐
𝑰= =$ = $ 3,242.40
𝟔𝟓% 𝟓
 SOLUTION NO. 3
NOW, WE HAVE THE VALUE OF “I”,
SUBSTITUTE TO THE FORMULA THEN
SOLVE :
𝒅
𝑰 = 𝐏𝐢
𝟑𝟔𝟎
𝟓𝟔
$ 3,242.40 = $ 250,000.00 𝐢
𝟑𝟔𝟎
$ 3,242.40 = $ 38,888.88889 𝐢

DIVIDE $ 38,888.88889 :
$ 3,242.40 $ 38,888.88889 𝐢
=
$ 38,888.88889 $ 38,888.88889
 SOLUTION NO. 3
CANCEL $ 38,888.88889 THEN,
SOLVE:
$ 3,242.40
𝐢=
$ 38,888.88889

𝐢 = 𝟎. 𝟎𝟖𝟑𝟑𝟕𝟔 × 𝟏𝟎𝟎

ANSWER
𝐢 = 𝟖. 𝟑𝟑𝟕𝟔%
 PROBLEM NO. 4
ENGR. AIZERY DEPOSITED TO THE
BANK WORTH $ 150,000.00 WAS
MADE FOR 70 DAY. THE NET
INTEREST WAS $ 5,235.12 AFTER
DEDUCTING THE 55% TAX. FIND
THE RATE OF RETURN ANNUALLY.

a. 0.0235
b. 39.887%
c. 0.1125
d. 18.357%
 SOLUTION NO. 4
GIVEN :
P = $ 150,000.00
NET INTEREST = $ 5,235.12
𝒅 = 70 DAYS
TAX = 55%

FORMULA :
NET OF INTEREST = 𝟏 − 𝑻𝑨𝑿 × 𝑰
𝒅
𝑰 = 𝐏𝐢
𝟑𝟔𝟎
 SOLUTION NO. 4
SOLUTION :
SOLVE FOR “I” BEFORE DEDUCTING THE TAX. LET
X=I
NET OF INTEREST = 𝟏 − 𝑻𝑨𝑿 × 𝑰
$ 5,235.12 = 𝟏 − 𝟓𝟓% × 𝑰

COMPUTE : 1 - 55% = 45%

$ 5,235.12 = 𝟒𝟓% × 𝑰

DIVIDE 45% :
$ 5,235.12 (45%×I)
=
𝟒𝟓% 𝟒𝟓%

CANCEL 65% THEN SOLVE :

$ 5,235.12 𝟓𝟖,𝟏𝟔𝟖
𝑰= =$ = $ 11,633.60
𝟒𝟓% 𝟓
 SOLUTION NO. 4
NOW, WE HAVE THE VALUE OF “I”,
SUBSTITUTE TO THE FORMULA THEN
SOLVE :
𝒅
𝑰 = 𝐏𝐢
𝟑𝟔𝟎
𝟕𝟎
$ 11,633.60 = $ 150,000.00 𝐢
𝟑𝟔𝟎
$ 11,633.60= $ 29,166.66667 𝐢

DIVIDE $ 38,888.88889 :
$ 11,633.60 $ 29,166.66667 𝐢
=
$ 29,166.66667 $ 29,166.66667
 SOLUTION NO. 4
CANCEL $ 38,888.88889 THEN,
SOLVE:
$ 11,633.60
𝐢=
$ 29,166.66667

𝐢 = 𝟎. 𝟑𝟗𝟖𝟖𝟔𝟔𝟐𝟖𝟓𝟕 × 𝟏𝟎𝟎

ANSWER :
𝐢 = 𝟑𝟗. 𝟖𝟖𝟕%
 PROBLEM NO. 5
ENGR. CARIG WAS GRANTED A LOAN
WORTH $ 950,000.00 BY HER
EMPLOYER WITH AN INTEREST OF 2%
FOR 200 DAYS ON THE PRINCIPAL
COLLECTED ADVANCE. HER EMPLOYER
WOULD ACCEPT A PROMISSORY NOTE
FOR THE LOAN NON-INTEREST FOR 200
DAYS. IF DISCOUNTED AT ONCE, FIND
THE PROCEEDS OF THE NOTE.
a. $ 563,012.00
b. $ 931,000.00
c. $ 900,000.00
d. $ 863,000.00
 SOLUTION NO. 5
GIVEN :
P = $ 950,000.00
𝐢 = 2%
𝒅 = 200 DAYS

FORMULA :
𝑰 = 𝐏𝐢
𝑫 = 𝑭𝒖𝒕𝒖𝒓𝒆 𝑾𝒐𝒓𝒕𝒉 − 𝑷𝒓𝒆𝒔𝒆𝒏𝒕 𝑾𝒐𝒓𝒕𝒉
 SOLUTION NO. 5
SOLVE FOR INTEREST :
𝑰 = $ 950,000.00 𝟐%
𝑰 = $ 19,000.00

SOLVE FOR THE DISCOUNT :

𝑫 = $ 950,000 − $19,000

ANSWER :
𝑫 = $ 931,000.00
 PROBLEM NO. 6
ENGR. JOSHUA BORROWED TO
WORLD BANK WORTH
$ 3,500,000.00 AT THE ANNUAL
INTEREST RATE OF 22%,
COMPOUNDED QUARTERLY. WHAT
IS THE EFFECTIVE RATE

a. 23.12%
b. 21.45%
c. 23.88%
d. 24.36%
 SOLUTION NO. 6
GIVEN :
P = $ 3,500,000.00
𝐢 = 22%
𝒎 = 4 COMPOUNDED QUARTERLY

FORMULA :
𝑬𝑹 = (𝟏 + 𝒊) 𝒎 −𝟏
 SOLUTION NO. 6
SOLUTION :
𝒎
𝑬𝑹 = (𝟏 + 𝒊) −𝟏
𝟐𝟐% 𝟒
𝑬𝑹 = (𝟏 + ) −𝟏
𝟒
𝒊 = 𝐈𝐍𝐓𝐄𝐑𝐄𝐒𝐓 𝐏𝐄𝐑 𝐏𝐄𝐑𝐈𝐎𝐃
𝒎 = 𝑵𝑼𝑴𝑩𝑬𝑹 𝑶𝑭 𝑰𝑵𝑻𝑬𝑹𝑬𝑺𝑻 𝑷𝑬𝑹 𝑷𝑬𝑹𝑰𝑶𝑫
𝑬𝑹 = 𝟎. 𝟐𝟑𝟖𝟖 × 𝟏𝟎𝟎

ANSWER :
𝑬𝑹 = 𝟐𝟑. 𝟖𝟖%
 PROBLEM NO. 7
ENGR. JESSICA OWES AT WORLD
BANK $ 500,000.00 DUE IN 1 YEAR
AND $ 850,000.00 DUE IN 5 YEARS.
SHE AGREES TO PAY $ 250,000.00
TODAY AND THE BALANCE IN 3
YEARS. HOW MUCH MUST SHE PAY AT
THE END OF 3 YEARS IF MONEY IS
WORTH 9% COMPOUNDED
QUARTERLY?
a. $ 582,425.18
b. $ 982,300.67
c. $ 862,556.22
d. $ 625,345.82
 SOLUTION NO. 7
GIVEN :
𝑃1 = $ 500,000.00
𝑃3 = $ 250,000.00
𝑃5 = $ 850,000.00
𝐢 = 9%
𝒎 = 4 COMPOUNDED QUARTERLY

FORMULA :
𝑬𝑹 = (𝟏 + 𝒊) 𝒎 −𝟏
𝐹𝑛
𝑷=
(𝟏+𝒊) 𝒏
 SOLUTION NO. 7
SOLUTION :
SOLVE FOR ER PER YEAR
𝟗% 𝟒
𝑬𝑹 = (𝟏 + ) −𝟏 = 0.09308331879
𝟒
SUBSTITUTE 𝑬𝑹 TO 𝒊
𝐹𝑛 $ 500K $ 850K
$ 250K + = +
(𝟏+0.09308331879 ) 𝟑 (𝟏+0.09308331879 ) 𝟏 (𝟏+0.09308331879 ) 𝟓

COMPUTE THE RIGHT SIDE FIRST :

𝐹𝑛
$ 250K + = $ 1,002,115.674
(𝟏+0.09308331879 ) 𝟑

MOVE TO THE RIGHT SIDE THE $ 250K :

𝐹𝑛
= $ 1,002,115.674 - $ 250,000
(𝟏+0.09308331879 ) 𝟑
 SOLUTION NO. 7
COMPUTE THE RIGHT SIDE :
𝐹𝑛
= $ 752,115.674
(𝟏+0.09308331879 ) 𝟑

MULTIPLY BOTH SIDES BY (𝟏+0.09308331879 ) 𝟑

𝐹𝑛 = $ 752,115.674 (𝟏+0.09308331879 ) 𝟑

𝐹𝑛 = $ 752,115.674(𝟏. 𝟑𝟎𝟔𝟎𝟒𝟗𝟗𝟗)

ANSWER :
𝐹𝑛 = $ 982,300.67
 PROBLEM NO. 8
ENGR. DWAYNE WAS DEPOSITED IN
HIS BANK 20 YEARS AGO WORTH
$ 1,580,000.00. AND TODAY, IT IS
WORTH $ 3,582,425.18. THE BANK
PAYS SEMI-ANNUALLY FOR INTEREST.
WHAT WAS THE INTEREST RATE PAID
IN HIS BANK ACCOUNT?

a. 9.86%
b. 4.14%
c. 7.21%
d. 3.33%
 SOLUTION NO. 8
GIVEN :
𝐹 = $ 3,582,425.18
P = 1,580,000.00
𝑛 = 20 YEARS
𝒎 = 2 SEMI − ANNUALLY

FORMULA :
𝒏 = 𝒏 𝒎
𝑭=𝑷 𝟏+𝒊 𝒏
 SOLUTION NO. 8
SOLUTION :
SOLVE FOR 𝒏
𝒏 = 𝟐𝟎 𝟐 = 𝟒𝟎

NOW, WE CAN SOLVE FOR 𝑭

𝒊 𝟒𝟎
$ 3,582,425.18 = 1,580,000.00(1 + )
𝟐
USING CALCULATOR, LET X = 𝒊
THEN, SHIFT+SOLVE :

𝒊 = 0.041352461 X 100

ANSWER :
𝒊 = 4.14%
 PROBLEM NO. 9
A FIRM BORROWS P 3,000 FOR 8
YEARS AT 9.15%. AT THE END OF 8
YEARS, IT RENEWS THE LOAN FOR
THE AMOUNT DUE PLUS 6,000 MORE
FOR 6 YEARS AT 10%. WHAT IS THE
LUMP SUM DUE?

a. P 16,673.18
b. P 4,014.56
c. P 15,625.81
d. P 12,853.96
 SOLUTION NO. 9
GIVEN :
𝑃1 = P 3,000.00
𝑃2 = P 6,000.00
𝑖1 = 9.15%
𝑖2 = 10%
𝑛1 = 8 YEARS
𝑛2 = 6 YEARS

FORMULA :
𝑭=𝑷 𝟏+𝒊 𝒏
 SOLUTION NO. 9
SOLUTION :
𝑭 = 𝑷 𝟑, 𝟎𝟎𝟎 𝟏 + 𝟗. 𝟏𝟓% 𝟖 + 𝑷 𝟔, 𝟎𝟎𝟎 𝟏 + 𝟏𝟎% 𝟔

𝑭 = 𝑷 𝟔, 𝟎𝟒𝟑. 𝟖𝟏𝟓𝟏𝟕𝟗 + 𝑷 𝟏𝟎, 𝟔𝟐𝟗. 𝟑𝟔𝟔

ANSWER :
𝑭 = 𝑷 𝟏𝟔, 𝟔𝟕𝟑. 𝟏𝟖
 PROBLEM NO. 10
A FIRM BORROWS P 500 FOR 2
YEARS AT 10%. AT THE END OF 2
YEARS, IT RENEWS THE LOAN FOR
THE AMOUNT DUE PLUS 600
MORE FOR 3 YEARS AT 10%. WHAT
IS THE LUMP SUM DUE?

a. P 1,403.6
b. P 4,014.56
c. P 1,645.84
d. P 2,853.25
 SOLUTION NO. 10

GIVEN :
𝑃1 = P 500.00
𝑃2 = P 600.00
𝑖1 = 10%
𝑖2 = 10%

FORMULA :
𝑭=𝑷 𝟏+𝒊 𝒏
 SOLUTION NO. 10
SOLUTION :
𝑭 = 𝑷 𝟓𝟎𝟎 𝟏 + 𝟏𝟎% 𝟐 + 𝑷 𝟔𝟎𝟎 𝟏 + 𝟏𝟎% 𝟑

𝑭 = 𝑷 𝟔𝟎𝟓 + 𝑷 𝟕𝟗𝟖. 𝟔

ANSWER :
𝑭 = 𝑷 𝟏, 𝟒𝟎𝟑. 𝟔