Deck 20: Engineering Economics

Question 1

If you deposit $1000 into an account that pays 3% compounded monthly, what would be the value in the account after 10 years?

Answer 1

Question 2

If you deposit $1000 into an account that pays 3% interest compounded annually, what would be the value in the account after 10 years?

Answer 2

Question 3

If you deposit $1000 into an account that pays 3% compounded semiannually, what would be the value in the account after 10 years?

Answer 3

Question 4

A bank charges interest at a rate of 21% per year, compounded monthly.If a senior in college borrows $4500 from the bank to pay her last tuition bill and intends to pay it 3 years later (after she gets a high-paying engineering job), how much will she have to pay?

Question 5

The interest that would be paid only on the initial borrowed or deposited amount is

A)initial interest.
B)simple interest.
C)compound interest.
D)present value interest.

Question 6

Your parents give you $12,000 as a college graduation gift.They tell you that it's from a $3,000 investment they made when they first got married that paid 10% simple interest.How long ago was their investment made?

Question 7

If you deposit $5,000 into a CD (certificate of deposit) that pays 3% interest compounding quarterly for 5 years, what is its value at maturity?

Question 8

If you deposit $1000 into an account that pays 3% compounded quarterly, what would be the value in the account after 10 years?

Question 9

If you were to take out a $10,000 student loan for 5 years, and promise to pay 4% interest compounded annually, how much interest would you pay?

Question 10

Economic factors always play important roles in engineering design decision making.

Question 11

If you deposit $100 into an account that pays 6% simple interest, what would be the value in the account after 10 years?

Question 12

If you deposit $1000 into an account that pays an interest rate that is compounded annually, what is the interest rate if there is $1343.91 in the account after 10 years?

Question 13

Visual aids that show the flow of costs and revenues over a period of time are known as

A)cash flow diagrams.
B)cost - revenue diagrams.
C)Venn diagrams.
D)business plans.

Question 14

When the interest paid on the initial principal also collects interest, this is called

A)initial interest.
B)simple interest.
C)compound interest.
D)present value interest.

Question 15

If you deposit $5,000 into a CD (certificate of deposit) that pays 3% simple interest for 5 years, what is its value at maturity?

Question 16

If you deposit $100 into an account that pays an interest rate that compounds quarterly, what is the interest rate if the value in the account after 30 years is $444?

Question 17

If you deposit $100 into an account that pays 5% compounded quarterly, how many years will it take to reach a value of $444?

Question 18

Your parents give you $12,000 as a college graduation gift.They tell you that it is from an investment they made 30 years ago that paid 10% simple interest.What was their original investment?

Question 19

If you were to take out a $10,000 student loan for 5 years, and promise to pay 4% simple interest, how much interest would you pay at the end of the fifth year?

Question 20

If you deposit $1000 into an account that pays 3% compounded daily, what would be the value in the account after 10 years?

Question 21

What interest rate, compounded quarterly, would cause an investment to double in twelve years?

Question 22

The Straight Line and the Modified Accelerated Cost Recovery System (MACRS) are examples of

A)accounting schemes.
B)depreciation methods.
C)investment strategies.
D)profit schemes.

Question 23

The percentage of par value that is paid to the bond holder at regular intervals is known as

A)par rate
B)par dividend
C)interest rate
D)annuity payment

Question 24

What is the effective interest rate corresponding to the nominal rate of 5% compounded semiannually?

Question 25

What is the effective interest rate corresponding to the nominal rate of 5% compounded monthly?

Question 26

In early 2013, $2000 was invested at a certain interest rate compounded annually.One year later, $1200 was deposited in another account at the same interest rate, also compounded annually.At the end of that year, there was a total of $3573.80 in both accounts.What is the annual interest rate?

Question 27

How much do you have to put away each month, at 3% compounded monthly, to have $5000 in 5 years?

Question 28

You walk into a bank with $1,000 that you wish to invest in a CD (certificate of deposit).The bank gives you two options:
Option #1: 3.97% compounded monthly
Option #2: 4.00% compounded annually
Which option is better for you? Compare the two options by comparing their effective interest rates.

Question 29

How many years will it take an investment to double at an annual interest rate of 4% compounded quarterly? Express your answer in years to 2 decimal places.

Question 30

There are many different types of bonds, but basically, they are loans that investors make to government or corporations in return for some gain.

Question 31

When a bond is issued, it will have

A)an issue date, a maturity date and an interest rate.
B)a maturity date, a par value, and an interest rate.
C)an issue date, a par value, and an interest rate.
D)an issue date, a maturity date, and a par value.

Question 32

What is the effective interest rate corresponding to the nominal rate of 5% compounded quarterly?

Question 33

In engineering, the term that refers to the sum of all costs that are associated with a structure, a service, or a product during its entire life span is

A)life-cycle cost.
B)life-span cost.
C)sustainability cost.
D)total cost.

Question 34

The par value of a bond is

A)the amount originally paid for the bond.
B)the amount that will be repaid at maturity date.
C)all of the above.

Question 35

What is the effective interest rate of a credit card corresponding to the nominal rate of 21% compounded monthly?

Question 36

The stated or the quoted interest rate is called the nominal interest rate, and the actual earned interest rate is called the effective interest rate.

Question 37

If you put $4000 in a CD (certificate of deposit), what fixed interest rate compounded quarterly would yield $5000 at the end of three years?

Question 38

How much money will you have available to you after four years if you put aside $120 a month in an account that gives you 3% interest compounded monthly?

Question 39

You have taken out a mortgage for a new home in the amount of $200,000.You have agreed to repay the mortgage in 30 years.What is your monthly payment if you agree to pay an interest rate of 6.0% compounded monthly?

Question 40

You have loaned your roommate $2,000.Your roommate has agreed to repay the loan in two years.What is the monthly payment if he agrees to pay an interest rate of 6% compounded monthly?

Question 41

Imagine the company that you work for borrows $12,000,000 at 8% interest, and the loan is to be paid in seven years according to the schedule shown.Determine the amount of the last payment.

Question 42

Imagine, your car loan payment extends for 5 years at 8% interest compounded monthly.After how many months do you pay off half of your loan?

Question 43

You are to consider the following projects.Which project would you approve if each project creates the same income? Assume i = 8%, and a period of 10 years.

Question 44

Imagine that as an engineering intern you have been assigned the task of selecting a motor for a pump.After reviewing motor catalogs you narrow your choice to two motors that are rated at 1.5 kW.Additional information collected is shown in an accompanying table.The pump is expected to run 4200 hours every year.After checking with your electric utility company, you determine the average cost of electricity is about 10 cents per kWh.Based on the information given here, which one of the motors will you recommend to be purchased? Assume i = 8%.

Question 45

What nominal rate, compounded monthly, would yield an effective rate of 10%?