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Christopher Willis, PhD, CAPM, P.

Eng, MCSCE

Engineering Management Principles and Economics


ENGR301-2/II Exam Review

1. Which of these statements is TRUE?


a. If interest is compounded quarterly, the interest period is four months
b. (F/A,12%,30) = (F/A,1%,360)
c. (F/P,i%,10) is greater than (P/F,i%,10) for all values above i%>0%

2. Which of these statements is FALSE?


a. A young engineer calculated that monthly payments of $A are required to pay off a
$5000 loan for n years at i% interest, compounded monthly. If the engineer decided
to borrow $10,000 instead, her monthly payments will be $2A.
b. 400(P/A,i%,5) 100(P/G,i%,5) 400(P/A,i%,4) 100(P/G,i%,4)
c. None of the above

3. Which of the following represents this cash flow?


$300
$200
$100
i1=5%
0

i2=7%
1

i3=9%
2

a. P = 100(P/F,5%,1) + 200(P/F,7%,1) + 300(P/F,9%,1)


b. P = 100(P/F,5%,1) + 200(P/F,5%,1)(P/F,7%,1) +
300(P/F,5%,1)(P/F,7%,1)(P/F,9%,1)
c. F = 100(F/P,5%,1) + 200(F/P,5%,1)(F/P,7%,1) + 300(F/P,5%,1)(F/P,7%,1)(F/P,9%,1)
d. F = 300(F/P,9%,1) + 200(F/P,9%,1)(F/P,7%,1) + 100(F/P,9%,1)(F/P,7%,1)(F/P,5%,1)
e. P=100(P/F,5%,1) + 200(P/F,7%,2) + 300(P/F,9%,3)

4. Which of the following incorrectly represents this cash flow, given i=10%.

Christopher Willis, PhD, CAPM, P.Eng, MCSCE

$250
$150

i=10%

$150

$100

$100

a. P = $150(P/F,10%,1) + $150(P/F,10%,2) + $100(P/F,10%,3) + $100(P/F,10%,4) +


$250(P/F,10%,5)
b. P = $150(P/A,10%,2) + $100(P/A,10%,2)(P/F,10%,2) + $320(P/F,10%,5)
c. P = $150(P/A,10%,2) + [$100+$150(A/G,10%,3)](P/A,10%,3)(P/F,10%,2) +
$100(P/F,10%,4)
d. P = $150(P/A,10%,2) + [$100+$75(A/G,10%,3)](P/A,10%,3)(P/F,10%,2) +
$175(P/F,10%,4)
e. None of the above.

5. Peter borrowed $20,000 from a bank to buy a car at an interest rate 9% compounded
monthly. This loan will be repaid in equal monthly installments over 4years. Immediately
after the 24th payment, Peter decided to pay the remainder of the loan in a single payment.
Compute the amount of the monthly payment, the final single payment, and the total amount
of interest that peter paid to the bank.

6. Find the present worth of the following cash flows given that the interest rate is 10%
compounded annually.

$500

$500

A=$400
4

10

12

14

16

18

20

$500

7. An investment company is considering building a 25-unit apartment complex in a growing


town. Based on the long-term growth potential of the town, it is felt that the company could
average 90% full occupancy for the complex each year. If the following items are reasonably
accurate estimates, what is the minimum monthly rent that should be charged if a 12%
MARR (per year) is desired? Use the annual worth method.
2

Christopher Willis, PhD, CAPM, P.Eng, MCSCE

Land investment cost


Building investment cost
Study period, N
Rent per unit per month
Upkeep expense per unit per month
Property taxes and insurance per month

$50,000
$225,000
20 years
?
$35
10% of total initial investment