ES 301 – Engineering Economics

Seat Work No. 1

Instructions: Answer the following problems briefly and concisely, please refrain from any
erasures.

1. Suppose that P10,000 is borrowed at a simple interest rate of 12% per annum. At the
end of one year, the interest would be:

2. Michael invested Php 50,000.00 in mutual fund with the interest rate of 4.8%. How much
interest would she earn after 5 years?

3. Jeff has one savings account with the interest rate of 2.2%, and one money market
account with the interest rate of 4.1% in a bank. If he deposits Php12,000.00 to the
savings account, and Php 18,000.00 to the money market account, how much money
will he have after 10 years?

4. Find the compound amount of Php 15,000 in 7 years at 8% interest compounded

annually. Show your cash flow diagram.

5. How much should be invested now (at present time) at 12% compound interest per year,
in order to receive Php 60,000 within 8 years; or what is the present equivalent worth of
Php 60,000 to be received eight years in the future? Show your cash flow diagram.

6. If you deposit Php15,000 in a bank every year for 25 years at interest rate 6%. Then this
amount becomes? Show your cash flow diagram.

7. If a certain machine undergoes a major overhaul now, its output can be increased by
20% - which translates into additional cash flow of Php 30,000 at the end of each year
for five years. If i = 12% per year, how much can we afford to invest to overhaul this
machine? Show your cash flow diagram.

8. You are running a bank. A customer agrees to pay you $100,000 each year with annual
interest rate of 10% for 5 years. How much money will you lend to him? Show your cash
flow diagram.

9. An enterprising student is planning to have personal savings totaling Php 10,000,000

when she retires at age 65. She is now 20 years old. If the annual interest rate will
average 8% over the next 45 years on her savings account, what equal end-of-year
amount must she save to accomplish her goal. Show your cash flow diagram.

10. You want to buy an apartment at the price of 10 million pesos. You will do this with a
mortgage from a bank at the annual interest rate 6% for 30 years. What is your annual
payment? Show your cash flow diagram.
 11. Suppose that a father, on the day his son is born wishes to determine what lump
amount would have to be paid into an account bearing interest of6% per year to provide
withdrawals of Php 20,000 on each of the son‟s 18th, 19th, 20th, and 21st birthdays.
Show your cash flow diagram.

12. Consider a principal amount of Php 20,000 to be invested for three years at a nominal
rate of 8% compounded semi-annually. The interest earned during the first six months
would be:

13. A credit card company charges an interest rate of 1.50 per month on the unpaid balance
of all accounts. The annual interest rate they claim is 12 x 1.375% = 16.5%. What is the
effective rate of interest per year being charged by the company?

14. Suppose that a Php100,000 lump-sum amount is invested for 10 years at a nominal rate
of 6% compounded quarterly. How much is it worth at the end of the tenth year? Show
your cash flow diagram.

15. At a certain interest rate compounded semi-annually, Php 25,000 will amount to Php
150,000 in 10 years. What is the amount at the end of 20 years? Show your cash flow
diagram.

16. Suppose that one has a bank loan for Php 300,000, which is to be repaid in equal end-
of-month installments for five years with a nominal interest rate of 12% compounded
monthly. What is the amount of each payment? Show your cash flow diagram.

17. A father wishes to provide Php 50,000 for his son on his 21st birthday. How much
should he deposit every 3 months in a savings bank which pay 3% compounded
quarterly, if the first deposit is made when the son is 3 years old? Show your cash flow
diagram.

18. Suppose that a Php1,000,000 lump-sum amount is invested for 10 years at a nominal
rate of 8% compounded quarterly. How much is it worth at the end of the tenth year?
Show your cash flow diagram.

19. At a certain interest rate compounded semi-annually, Php 50,000 will amount to Php
200,000 in 10 years. What is the amount at the end of 20 years? Show your cash flow
diagram.

20. Suppose that there exists a series of 20 end-of-year receipts of Php 30,000 each, and it
is desired to compute their equivalent worth as one of the tenth year is the nominal
interest rate is 12% compounded quarterly.

Please submit your seatwork September 30, 2022, Saturday to your Class
Representative. Late papers are not accepted. Use A4 Bond Paper and as much as
possible limit in any erasures.