IE198

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PROBLEMS
Find the value of P if F = $5,000 , n = 3 years, and i = 8% compounded

ANSWERS
P=$3,969.15

annually. Find the value of P.

P1,500.00 was deposited in a bank account, 20 years ago. Today it is worth

3.5%

P3,000.00. Interest is paid semi-annually. Determine the interest rate paid on

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this account.
What will be the future worth of money after 12 months, if the sum of P 25,000

P28,000

is invested today at simple interest rate of 1% per month?

Find the interest factor if F = $5,000 , n = 3 years, and i = 8% compounded

0.79383

annually.
A bank charges 12% simple interest on a P300.00 loan. How much will be

P408.00

repaid if the loan is paid back in one lump sum after three years?
If P5,000.00 shall accumulate for 10 years at 8% compounded quarterly, find

P6,040.20

the compounded interest at the end of 10 years.

If a firm is producing a rate of output for which MC exceeds price:

The firm can increase its

In monopoly and competition, a firm should expand production when:

profit by decreasing output.

Marginal revenue is above

marginal cost.
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A contractor has a job which should be completed in 100 days. At present he

$ 7, 500

has 80 men on the job and estimated that they will finish the work in 130 days.
Of the 80 men; 50 are paid at $12 a day, 25 at $18 a day and 5 at $25 a day.
For each day beyond the original 100 days, the contractor has to pay $250
liquidated damages.
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What is the amount of the liquidated damages?

Which of the following should increase during the expansion phase of the

Real GDP

business cycle?
If P500 is invested at the end of each year for 6 years, at an effective annual

P3,577.00

interest rate of 7%. What is the total amount available upon the deposit of the
6th payment?
What is the ordinary interest earned on a $20,000 for a period of 29 days at

80.55

5% simple interest?
An asset is purchased for P9,000.00. Its estimated life is 10 years, after which

P7,545.00

it will be sold for P1,000.00. Find the book value during the first year if sum-of
the-year's digit (SOYD) depreciation is used.
What is the effective rate corresponding to 16% compounded daily? Take 1

0.1735

year = 360 days.

Find the effective interest rate if the nominal rate 12% compounded monthly

0.1268

with time interval of one year.

A debt of P10,000 with 10% interest compounded semi-annually is to be

P1,295.05

amortized by semi-annual payment over the next 5 years. The first due in 6
months. Determine the semi-annual payment?

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The eventual decline in the MPP of labor can be attributed to:

The law of diminishing

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An upward-sloping supply curve a labor reflects:

returns
The increasing opportunity

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A company must relocate one of its factories in three years. Equipment for the

cost of labor.
P5,625.28

loading duck is being considered for purchase. The original cost is P20,000,
the salvage value after three years is P8,000. The company's rate of return (i)

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on money is 10%. Determine the capital recovery rate per year.

The initial investment to buy an equipment of a proposed project to increase

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productivity is $25,000 and this equipment will have a salvage value of $5,000
at the end of its expected life of 5 years. Increased productivity attributed to
the equipment will amount to $8,000 per 5 year after extra operating costs
have been subtracted from the value of the additional production. If MARR
(Minimum Attractive Rate of Return) is 20%, compute the Annual Worth

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2
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Method (AW) using the six (6) methods for making Economy Studies.
The effective rate of 14% compounded semi-annually is

0.1449

Compute the equivalent rate of 8% compounded quarterly to a rate

0.0797

compounded bi-monthly.
Find the difference between the amount of $100 at simple interest and the

2.62

compound interest for 5 years at 5%.

How long will it take the money to triple itself if invested at 10% compounded

11.3

semi-annually?
A man inherited regular endowment of P100,000 every end of 3 months for 10

P3,702,939

years. However, he may choose to get a single lump sump payment at the end
of 4 years. How much is this lump sump if the cost of money is 4%

2
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compounded quarterly?
The initial investment to buy an equipment of a proposed project to increase

934.29

productivity is $25,000 and this equipment will have a salvage value of $5,000
at the end of its expected life of 5 years. Increased productivity attributed to
the equipment will amount to $8,000 per 5 year after extra operating costs
have been subtracted from the value of the additional production. If MARR
(Minimum Attractive Rate of Return) is 20%, compute the Present Worth

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Method (PW) using the six (6) methods for making Economy Studies.
A fixed capital investment of $10M and an estimated working capital of $2M is

$12M

required for a proposed manufacturing plant. Annual depreciation is estimated

to be 10% of the fixed capital. Determine the Capital Investment
Which of the following is equivalent to TC:

FC + VC

Find the interest factor if A = $600 , n = 15 years, and i = 5% compounded

10.379

annually
What is the corresponding effective rate of 18% compounded semi-annually?

0.1948

A piece of machinery can be bought for P10,000.00 cash for P2,000.00 down

0.0461

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and payments of P750.00 per year for 15 years. What is the annual interest
rate for the time payments?
A man expect to receive P 25,000 in 8 years. How much is that money worth

P13,265.83

now considering interest at 8% compounded quarterly?

A privately owned summer camp for youngsters has the following data for 12

Z = $4,800

week season:
Charge per camper $60/week
Variable Cost per Camper $40/week
Fixed Costs $24,000/season
Capacity 150 campers
What is the profit for the 12-week season if the camp operates at 80 percent

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capacity?
At 6%, find the capitalized cost of a bridge whose cost is P250M and life is 20

245.3

years, if the bridge must be partially rebuilt at a cost of P100M at the end of
each 20 years.
What rate of interest compounded annually is the same as the rate of interest

0.0824

of 8% compounded quarterly?
The amount of P12,800 in 4 years at 5% compounded quarterly is:

P15,614.59

Find the value of P if A = $600 , n = 15 years, and i = 5% compounded

P = $6,227.40

annually:
Which of the following conditions is a characteristic of a perfectly competitive

Products of all sellers in the

market?
A fixed capital investment of $10M and an estimated working capital of $2M is

industry are homogenous.

0.125

required for a proposed manufacturing plant. Annual depreciation is estimated

to be 10% of the fixed capital. Determine the Annual Rate of Return on Total

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Investment
Find the value of P if F = $5,000 , n = 3 years, and i = 8% compounded annually.

P = $3,969.15

Find the vauke of P

The tag price of a certain commodity is for 100 days. If paid in 31 days, there is a

0.1614

3% discount. What is the simple interest paid?

What will be the future worth of money after 12 months, if the sum of P 25,000 is

P28,000

invested today at simple interest rate of 1% per month?

A young engineer borrowed P10,000 at 12% interest and paid p2,000 per annum

P6,919.28

for the last four years. What does he have pay at the end of the fifth year in order
to pay his loan?
A service car whose cash price was P540,000 was brought with the down

0.24

payment of P162,000 and monthly of P10,874.29 for 5 years. What was the rate of
interest if compounded monthly?
Find the nominal rate which if converted quarterly could be used instead of 12%

0.1183

compounded semi-annually.
If a single perfectly competitive firm raises its price above the market price:

It will not sell any output.

A contractor has a job which should be completed in 100 days. At present he has

$ 152,750

80 men on the job and estimated that they will finish the work in 130 days. Of the
80 men; 50 are paid at $12 a day, 25 at $18 a day and 5 at $25 a day. For each
day beyond the original 100 days, the contractor has to pay $250 liquidated
damages.

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What is the "total wages" if 80 men will do the job?

Find the values of n if F = $7,000 , P = $3,500 , and I = 6% compounded quarterly

N = 11.63 years

If P500 is invested at the end of each year for 6 years, at an effective annual

P3,577.00

interest rate of 7%. What is the total amont available upon the deposit of the
6th payment?
Compared to a competitive market with the same cost and market-demand
circumstances, monopoly results in:
A fixed capital investment of $10M and an estimated working capital of $2M is

Higher prices and lower

output
$1.5M

required for a proposed manufacturing plant. Annual depreciation is estimated to

be 10% of the fixed capital. Determine the Net Annual Profit
Given an annual usage of 8, 000 units, unit commodity cost $ 2, cost of placing an

22 lots

order of $ 5, and annual inventory carrying cost of 30% of the average inventory;
What is the lot size?
A man borrowed P 20,000 from a local commercial bank which has a simple

0.19

interest of 16% but the interest is to be deducted from the loan at the time that the
money was borrowed and the loan is payable at the end of one year. How much is

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the actual rate of interest?

A privately owned summer camp for youngsters has the following data for 12 week

3 MONTHS

season:
Charge per camper $60/week
Variable Cost per Camper $40/week
Fixed Costs $24,000/season
Capacity 150 campers

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What is the equivalent of 12 week/season into months?

Suppose a supply disruption causes oil prices to rise, which leads to a recession

Cyclical unemployment

in the Untited States, and many Americans lose their jobs. Which of the following
types of unemployment would develop in the U.S economy?
By condition of a will, the of P2,000.00 to a small business for a period of six

11.57 years

years. With a given interest rate on amounts to P50,000. When will the girl receive
the money if the fund is invested at 8% compounded quarterly?
What nominal rate, compounded semi-annually, yields the same amount as 16%

0.0824

compounded quarterly?
Find the present worth of a future payment of P 100,000 to be made in 10 years

P30,355.68

with an interest of 12% compounded quarterly.

Marginal cost can best be approximated by the formula:

Change in total cost/change

Suppose a firm has an annual budget of $100,000 in wages and salaries, $50,000

in output
Loss of $70,000

in materials, $20,000 in new equipment, #10,000 in rented property, and $20,000

in interest cost on capital. The opportunity cost for stockholder investments is
$30,000 per year, and there is an owner-manager who could receive income of

$50,000 by woring elsewhere. The firm earns revenues of $210,000 per year.

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What is the economic profit for the firm described above?

The initial investment to buy an equipment of a proposed project to increase

0.2125

productivity is $25,000 and this equipment will have a salvage value of $5,000 at
the end of its expected life of 5 years. Increased productivity attributed to the
equipment will amount to $8,000 per 5 year after extra operating costs have been
subtracted from the value of the additional production. If MARR (Minimum
Attractive Rate of Return) is 20%, compute the Explicit Reinvestment Rate of

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Return (ERRR) using the six (6) methods for making Economy Studies.
How many years will it take $10 to be four times its original value if invested at the

20.15 years

rate of 7% compounded semi-annually?

What is the exact interest earned on a $20,000 for a period of 29 days at 5%

79.45

simple interest?
A deposit of P110,000 was made for 31 days. The net interest after deducting

0.1175

20% witholding tax is P890.36. Find the rate of return annually.

The amount of P50,000 was deposited in the bank earning at interest of 7.5% per

P71,781.47

annum. Determine the total amount at the end of 5 years, if the principal and
interest were not withdrawn during the period.
A steel mill estimates that one of its furnaces will require maintenance P20,000.00

P7,897.35

at the end of 2 years, P40,000.00 at the end of 4 years and P80,000.00 at the end
of 8 years. What uniform semi-annual amounts could it set aside over the next
eight years at the end of each period to meet these requirements of maintenance

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cost if all funds would earn interest at the rate of 6% compounded semi-annually?
When there are positive externalities from the consumption of a good, the

Subsidize consumption

government should:
If you borrow money from your friend at 12% "simpe interest", determine the P.W

$ 18, 348.62

of $20,000 which is due at the end of 9 months.

P4,000 is borrowed for 75 days at 16% per annum simple interest. How much will

P4,133.33

be due at the end of 75 days?

A privately owned summer camp for youngsters has the following data for 12 week

$20/week

season:
Charge per camper $60/week
Variable Cost per Camper $40/week
Fixed Costs $24,000/season
Capacity 150 campers

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What is the Contribution Margin per week?

Machine cost = $15,000; Life = 8 years; Salvage Value = $3,000. What minimum

2456.66

cash return would the investor demand annually from the operation of this
machine if he desires interest annually at the rate of 8% on his investment and

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accumulates a capital replacement fund by investing annual deposits at 5%?

At an interest rate of 10% compounded annually, how much will a deposit of

P6,265.87

P1500 be in 15 years?
A man borrowed P100,000 at the interest rate of 12% per annum, compounded

0.1255

quarterly. What is the effective rate?

As labor productivity increases, which of the following shifts in the labor market

Demand for labor should

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How much must be deposited at 6% each year beginning of January 1, year 1, in

shift to the right.

P717.00

order to accumulate P5,000 on the date of the last deposit, January 1, year 6?
A sum of P1,000 is invested now and left for eight years, at which time the

P706.00

should result, ceteris paribus?

principal is withdrawn. The interest was accrued is left for another eight years. If
the effective annual interest rate is 5%. What will be the withdrawal amount at the

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end of the 16th year?

A manufacturing firm wishes to give each 80 employees a holiday bonus. How
much is needed to invest monthly for a year at 12% nominal interest rate
compounded monthly, so that each employee will receive a P2,000 bonus?
A shoe manufacturer produces a pair of shoes at a labor cost of $23.50. The fixed
changes on the business are $10, 125 a month and the variable costs are $2.50 a
pair. If the shoes sell the retailers for $48 a pair, how many pairs must be
produced and sold each month for the manufacturer to break and even?

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P12,610.00

750