Quiz #4 (Engineering Economy) Quiz #4 (Engineering Economy)
Show your complete solution. Write legibly and BOX your final Show your complete solution. Write legibly and BOX your final
answers. No box means no final answer. Do not write at the answers. No box means no final answer. Do not write at the
back of your papers. CHEATING will not be tolerated and those back of your papers. CHEATING will not be tolerated and those
caught will get a score of 0. caught will get a score of 0.
1. Mark invests P10,000 now for the college education of his 1. Mark invests P10,000 now for the college education of his
2-year old son. If the fund earns 14% effective, how much 2-year old son. If the fund earns 14% effective, how much
will the son get each year starting from his 18th birthday to will the son get each year starting from his 18th birthday to
the 22nd birthday? the 22nd birthday?
2. A state engineer estimates the cost of a canal is $680 2. A state engineer estimates the cost of a canal is $680
million. The legislative analyst estimates the equivalent million. The legislative analyst estimates the equivalent
annual cost of the investment for the canal to be $20.4 annual cost of the investment for the canal to be $20.4
million. If the analyst expects the canal to last indefinitely, million. If the analyst expects the canal to last indefinitely,
what interest rate is he using to compute equivalent what interest rate is he using to compute equivalent
annual cost? annual cost?
3. Consider an annuity consisting of three cash flows of 3. Consider an annuity consisting of three cash flows of
$2000 each. Assume a 4% interest rate. What is the $2000 each. Assume a 4% interest rate. What is the
present value of the annuity if the first cash flow occurs present value of the annuity if the first cash flow occurs
two years from now? two years from now?
4. A retirement fund earns 8% compounded quarterly. If 4. A retirement fund earns 8% compounded quarterly. If
$400 is deposited every three months for 25 years, $400 is deposited every three months for 25 years,
determine the amount in the fund at the end of 25 years. determine the amount in the fund at the end of 25 years.
5. The beneficiary of a life insurance policy is to receive 5. The beneficiary of a life insurance policy is to receive
$2000 a year for 5 years, the first payment to be made at $2000 a year for 5 years, the first payment to be made at
the time of death of the injured. Find the value of the the time of death of the injured. Find the value of the
annuity at the time of death of the injured, assuming the annuity at the time of death of the injured, assuming the
current interest rate to be 4%. current interest rate to be 4%.
Quiz #4 (Engineering Economy) Quiz #4 (Engineering Economy)
Show your complete solution. Write legibly and BOX your final Show your complete solution. Write legibly and BOX your final
answers. No box means no final answer. Do not write at the answers. No box means no final answer. Do not write at the
back of your papers. CHEATING will not be tolerated and those back of your papers. CHEATING will not be tolerated and those
caught will get a score of 0. caught will get a score of 0.
1. Mark invests P10,000 now for the college education of his 1. Mark invests P10,000 now for the college education of his
2-year old son. If the fund earns 14% effective, how much 2-year old son. If the fund earns 14% effective, how much
will the son get each year starting from his 18th birthday to will the son get each year starting from his 18th birthday to
the 22nd birthday? the 22nd birthday?
2. A state engineer estimates the cost of a canal is $680 2. A state engineer estimates the cost of a canal is $680
million. The legislative analyst estimates the equivalent million. The legislative analyst estimates the equivalent
annual cost of the investment for the canal to be $20.4 annual cost of the investment for the canal to be $20.4
million. If the analyst expects the canal to last indefinitely, million. If the analyst expects the canal to last indefinitely,
what interest rate is he using to compute equivalent what interest rate is he using to compute equivalent
annual cost? annual cost?
3. Consider an annuity consisting of three cash flows of 3. Consider an annuity consisting of three cash flows of
$2000 each. Assume a 4% interest rate. What is the $2000 each. Assume a 4% interest rate. What is the
present value of the annuity if the first cash flow occurs present value of the annuity if the first cash flow occurs
two years from now? two years from now?
4. A retirement fund earns 8% compounded quarterly. If 4. A retirement fund earns 8% compounded quarterly. If
$400 is deposited every three months for 25 years, $400 is deposited every three months for 25 years,
determine the amount in the fund at the end of 25 years. determine the amount in the fund at the end of 25 years.
5. The beneficiary of a life insurance policy is to receive 5. The beneficiary of a life insurance policy is to receive
$2000 a year for 5 years, the first payment to be made at $2000 a year for 5 years, the first payment to be made at
the time of death of the injured. Find the value of the the time of death of the injured. Find the value of the
annuity at the time of death of the injured, assuming the annuity at the time of death of the injured, assuming the
current interest rate to be 4%. current interest rate to be 4%.
