ENGINEERING ECONOMICS

I. Interest

P = 100php --------------present worth or principal

i = 15% ------------------- interest rate

I = 15php ---------------- interest

F = 115php ------------- Future Worth

n = time or period

Two of Types of Interests

a. Simple Interest (Ordinary, Exact)

b. Compound Interest

For Leap Year:

1. Basta divisible ng 4, LEAP YEAR!

2. For Century Years, basta divisible ng 400, LEAP YEAR!
100
200
300
400 LEAPYEAR
500
600
1400
1500
1600 LEAP YEAR
1700
1800
1900
2000 LEAP YEAR
2400 LEAP YEAR

1. Determine the ordinary simple interest on P6,000 for 9 months and 10 days if the rate of interest is 12%.
a. P450.00 c. P350.00
b. P560.00 * d. P150.00

F = P(1 + in) and I = Pin

I = Pin
9 x 30+10
I = 6000(0.12)( )
360
I = P560.00

F = P(1 + in)
9 x 30+10
F = 6000(1 + 0.12× )
360
F = P6560.00

I=F-P

2. If you borrow money from your friend with simple interest of 12%, find the present worth of P20,000 which is due at the end of nine months.
a. P180,348.60 c. P18,348.60 *
b. P108,348.60 d. P28,568.60

F = P(1 + in)
9
20,000 = P (1 + 0.12× )
12
20000 = P (1.09)
20000/1.09 = P
P = P18,348.62

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. P10,500.00

F = P (1 + in)
15
12,100 = P (1 + 0.168× )
12
12,100 = P (1.21)
P = P 10,000.00

4. Determine the exact simple interest on P3,000.00 from January 15 to June 20, 2007 if the rate of simple interest is 14%.
a. P179.51 * c. P149.81
b. P239.51 d. P154.51

Jan = 16
Feb = 28
Mar = 31
Apr = 30
May = 31
Jun = 20
TOTAL = 156 days

I = Pin
156
I = 3000 (0.14) ( )
365
I = P179.51

Dec. 01, 2007 up to Jun. 20, 2008

Dec =30
Jan = 31
Feb = 29
Mar = 31
Apr = 30
May = 31
Jun = 20
TOTAL =

nm
im
F=P(1+ )
m
F = Future Worth
P = Present worth
im = nominal interest rate
n = time or period
m = compounding element

m = 1 (annually)
m = 2 (semi-annually)
m = 4 (quarterly)
m = 6 (bi-monthly)
m = 12 (monthly)
m = 24 (semi-monthly)
m = 365 (daily)
m = ∞ (continuously)

5. What is the accumulated amount after three years of P6,500 invested at the rate of 12% per year compounded semi-annually?
a. P9,550.37 c. P8,750.37
b. P9,220.37 * d. P6,250.37

i m nm
F=P(1+ )
m

0.12 3 x2
F=6500(1+ )
2
F = P9,220.37

6. How long will it take money to double itself if invested at 5% compounded annually?
a. 11 c. 25
b. 13 d. 14 *

nm
im
F=P(1+ )
m

0.05 n(1)
2=1( 1+ )
1
2 = 1.05 n

ln (2) = ln (1.05) n

ln (2) = n [ ln 1.05 ]

ln 2
=n
ln 1.05
n = 14.21 years

7. If the nominal interest rate is 3%, how much is P5,000.00 worth in 10 years in a continuously compounded account?
a. P6,750.00 * c. P7,750.00
b. P8,750.00 d. P5,750.00

im n
F=P e
F = 5000e0.03(10)

F = P6749.29

ANOTHER SOLUTION:

i m nm
F=P(1+ )
m

10(99999)
0.03
F=5000(1+ )
99999
F = P6749.29

8. A father 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?
a. P135,868.18 * c. P532,868.18
b. P315,868.28 d. P145,868.18