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Worksheet#1 MCQ

This document contains a worksheet with 9 multiple choice questions related to engineering economy and compound interest. The questions cover topics such as calculating interest earned over multiple years on deposits in savings accounts, determining present worth of cash flows, calculating account balances over time, and finding equivalent values of cash flows given interest rates.

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Ahmad Medlej
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121 views3 pages

Worksheet#1 MCQ

This document contains a worksheet with 9 multiple choice questions related to engineering economy and compound interest. The questions cover topics such as calculating interest earned over multiple years on deposits in savings accounts, determining present worth of cash flows, calculating account balances over time, and finding equivalent values of cash flows given interest rates.

Uploaded by

Ahmad Medlej
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Beirut Arab University

Faculty of Engineering
Department of Industrial Engineering and Management

Engineering Economy-INME221
Worksheet#1- MCQ -Compound Interest

1. If you deposit $1,000 over three years at 9% annual compounded


interest (meaning that you will make one lump sum withdrawal at the
end of three years), what is the interest earned in the 2nd year?

 $106.93
 $98.34
 $98.10
 $90.00

2. What is the present worth of the following income strings at an


interest rate of 10%? (All cash flows occur at year end.)

 $37,741
 $30,000
 $32,450
 $43,923

3. Assume that $200 is deposited today, two years from now, four years
from now, six years from now, and eight years from now in a savings
account which earns 10% annual interest, what is the balance at the
end of year 9?

 $708
 $1,670
 $1,100
 $1,517

4. You borrowed $1,000 at 8%, compounded annually. The loan was


repaid according to the following schedule.

 $460
 $298
 $345
 $108

5. Two banks offer different interest rates on your deposit of $10,000


over 3 years. Bank A offers an 8% interest compounded annually and
Bank B offers an 8.5% simple annual interest. Which of the following
statements is true?
 With Bank B, the total balance at the end of year 3 would be $12,773.
 You earn the same amount of interest over 3 years.
 With Bank B you earn $150 more interest than with Bank A
 With Bank A you earn $47 more than with Bank B

6. How many years will it take for an investment to double itself if the
interest rate is 8% compounded annually?
 8.5 < N ≤ 9.5 years
 9.5 < N ≤ 10.5 years
 10.5 < N ≤ 11.5 years
 7.5 < N ≤ 8.5 years

7. What is the equivalent present worth for the following cash flow series
at an interest rate of 15%?
 $6,977
 $6,727
 $5,849
 $4,850

8. What value of X makes these two cash flows equivalent assuming an


interest rate of 10%?

 $812
 $744
 $715
 $645

9. What value of F3 would be equivalent to the payments shown in the


cash flow diagram below? Assume that the interest rate is 10%,
compounded annually.

 $450
 $462
 $457
 $488

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