ENS 331

ENGINEERING ECONOMICS

CHAPTER 1: SIMPLE INTEREST

ENGR. JOEY C. SOLAMILLO
Licensed Civil Engineer / Accredited Materials Engineer / ISO 9001:2015 Quality Management
System Lead Auditor / ISO 9001:2015 Internal Auditor / Saudi Council of Engineers
 ENS 331

EXAMINATION NO. 1
SIMPLE INTEREST

ENGR. JOEY C. SOLAMILLO

Licensed Civil Engineer / Accredited Materials Engineer / ISO 9001:2015 Quality Management System Lead Auditor /
ISO 9001:2015 Internal Auditor / Saudi Council of Engineers
Problem No. 1
Solution:
Let X = sum invested at greater interest
Let Y = sum invested at lesser interest
Let i = Interest of Y
Let 4i = Interest of X
X + Y = 50,000

Sum Investment or the maturity value = Principal + Interest

F = P + Prt
F = P (1+rt)
Solution:
Sum Investment or the maturity value = Principal + Interest
F = P + Prt
F = P (1+rt)
1st Investment: F = 37,000 t = 3 years P = x r = 4i
F = P (1+rt)
37,000 = x (1+ 4i3)
X = 37,000 / (1 + 12i)
2nd Investment: F = 24,000 t = 10 years P = y r = i
F = P (1+rt)
24,000 = y (1+ i10)
y = 24,000 / (1 + 10i)
Solution:
X + Y = 50,000

37,000 24,000 50,000

(1+12i) (1+10i)

Simplifying the equation:

60,000i2 + 4,400i – 112 = 0

60,000i2 + 4,400i = 112
By using trial and error method:
i = 0.02 and i = -0.093
Use i = 0.02 and 4i = 0.08
Problem No. 2
In how much time will the simple interest on $3,500 at the rate
of 9% p.a be the same as simple interest on $4,000 at 10.5% p.a
for 4 years?
Formula for simple interest is I = Prt
Given values, $4,000 at 10.5% p.a for 4 years?
Let us substitute these values in the above formula
I = 4000 ( 0.105 ) (4)
I = 1680
Problem condition: The interest of $1,680 is the same as that on
$3,500 at 9% p.a for suppose 't' years.
Formula for simple interest is I = Prt
Given values, I = 1680, P = 3500, r = 9%
Let us substitute these values in the above formula
1680 = 3500 ( 0.09 ) (t)
t = 5.33 years
Problem No. 3
In simple interest, a sum of money doubles itself in 10
years. Find the number of years it will take to triple
itself.
Solution :
Let P be the sum of money invested.
Given values:
- Sum of money doubles itself in 10 years
- Then, P will become 2P in 10 years.
Now we can calculate interest for ten years as given below:
From the above calculation, P is the interest for the first 10 years.
In simple interest, interest earned will be same for every year.
So, interest earned in the next 10 years also will be P.
 Below figures are self explanatory:

Hence, it will take 20 years for the principal to become triple itself.
 Problem No. 4
In simple interest, a sum of money amounts to $ 6200
in 2 years and $ 7400 in 3 years. Find the principal.
Solution :
Given values:
- At the end of 2 years, we get $6200
- At the end of 3 years, we get $7400
-From these two information, we can get the interest earned
in the 3rd year as given below.
In simple interest, interest will be same for every year.
Based on this, we can calculate the principal as given below.
Below figures are self explanatory:

S 3800
S 6200 S 7400
S 5000

Hence, the principal is $3800

 Problem No. 5
Steve invested $ 10,000 in a savings bank account that
earned 2% simple interest. Find the interest earned if
the amount was kept in the bank for 4 years.
Solution :
Formula for simple interest is
I = Prt
Given: P = 10000, t = 4, r = 2%
 Substituting the given values in the above formula
I = 10000(2/100)(4)

I = 800
Hence, the Interest earned for the investment = $ 800.