REPUBLIC OF THE PHILIPPINES

NUEVA ECIJA UNIVERSITY OF SCIENCE AND TECHNOLOGY

CABANATUAN CITY, NUEVA ECIJA

COMPREHENSIVE EXAMINATION 1

MODULE 3
INSTRUCTOR: Engr. Derick Aldrin L. Esteban
ENGINEERIN
G ECONOMY
SIMPLE INTEREST
COMPOUND INTEREST
ANNUITY
B R E A K E V E N A N A LY S I S
SIMPLE
INTEREST
Interest refers
to the cost of
borrowing money
or the reward for
lending money.
 SIMPLE INTEREST

Where I = Interest
P = Present worth of money / P I
Principal
F
r = rate of return / interest rate P
n = number of time periods
0 1 2
SIMPLE INTEREST

P
n = number of time periods F

0 1 2
 SAMPLE
PROBLEM # 1
An emergency loan of ₱50,
000 was made on January 1,
2002 and must be repaid on
April 1, 2005.
o How much is the interest
that must be paid with
50000 ordinary simple interest
at 5% per year?
• How much exactly is the
interest that must be paid
01/01/200 01/01/200 01/01/200 01/01/2005
4
at 5% annual interest?
2 3
Original Price:
Discounted Price:
SAMPLE
PROBLEM # 2
An air fryer costing
2400 is to be paid in 2
months. If one can pay
in just a month they
Solution 2:
will have 5% discount.
Find the rate of
Discounted amount: 2400
interest.`
2280

0 1 2
COMPOUNDED
INTEREST

Compound interest is the

interest on savings calculated
on both the initial principal and
the accumulated interest from
previous periods.

You could say it is “interest on

interest”.
 COMPOUND INTEREST
F or P 1 2 I
P I F2
P2
P
0 1 2

Compounding m
Where: Annually 1
Semiannually 2
Quarterly 4
Bi-Monthly 6
Monthly 12
Continuous ∞
 SAMPLE
PROBLEM # 3
In 1997, a rich young
woman bought a land
for ₱45,000. She was
reminiscing and thought
if I had put that money
in the bank who offers
P F 8% interest, how much
money would she have
now if the interest is
compounded monthly?
0 1
SAMPLE
PROBLEM # 4
The money deposited
in a bank quadruples
after 12 years. How
much interest did the
bank offer if it is
compounding
continuously?
ANNUITY
A type of compound
interest where there is a
series of uniform
payments made at an
equal intervals / periods
of time. Denoted by A.
 ORDINARY ANNUITY
Annual payments starts at the end of each year.

F
P
Caltech:
A
0 1 2 3 4 5 6 7 8 9 10
 ANNUITY DUE F
Annual payments starts at the beginning of each year.

P A
0 1 2 3 4 5 6 7 8 9 10

Caltech:
F
P
A
0 1 2 3 4 5 6 7 8 9 10
DEFERRED ANNUITY
Annual payments starts at the at some point in the future.
F
P A
0 1 2 3 4 5 6 7 8 9 1 1 1 1
m 0
n 1 2 3
PERPETUITY
Annual payments goes on for a very long time.

P A
0 1 2 3 4 5 6 7 8 9 1
0

𝑨
𝑷=
𝒊
 F SAMPLE
50000
PROBLEM # 5
A A 50 million bond was
invested to a town in
0 3 6 9 1 1 18 2 24 27 30 order to build a dam.
2 5 1 The bond has an interest
of 6% annually and must
be paid over a 30 year
period. How much
annual payment should
be produced to pay the
bond completely.
Given: A = 20 000 every six months
i = 6% semiannually F SAMPLE
PROBLEM # 6
20000 How much money did a
contractor spend if he
0 1 2 3 4 5 6 7 8 paid a loan of 6%
interest compounded
semiannually? He paid
₱20 000 on the
beginning of every six
months for eight years.
 F
150,000
A SAMPLE
0
PROBLEM # 7
1 2 3 4 5 6 7 8
0 1 2 3 4 5 A concrete mixer
originally costing
₱150,000. It may also be
bought thru installment
to be paid in a total of
five annual payments,
starting at the end of
four years. What is the
amount of each
payment if the interest
rate is 6%?
EFFECTIVE RATE

Considering one year

ASSUME
SAMPLE
PROBLEM # 8
Which among the following
has the lowest effective rate of
interest?

12.35% compounded annually

11.90% compounded semi-
annually
12.20% compounded quarterly
11.60% compounded monthly
P
SAMPLE
0 1 2 3 4 5 PROBLEM # 9
100
I want to withdraw
0 $1000 every year. How
much should I put in a
bank offering 8%
interest compounded
semi-annually?
DEPRECIATION

Depreciation is a decrease
in the (book) value of assets
over time, due in particular
to wear and tear.
Depreciation is an ongoing
process until the end of the
life (economic life) of assets.
 DEPRECIATION
Where n = economic life
FC = Principal / First Cost
FC = BV0 SV = Salvage Value
BV = Book Value
Dm
m = anytime before n
d
BVm Dm = total depreciation for
m years
d = depreciation charge

SV = BVn

0 1 2 3 … m-1 m n
DEPRECIATION
STRAIGHT LINE S I N K I N G F UN D
METHOD METHOD
 DEPRECIATION
DECLIDING DOUBLE DECLINING S UM - O F-T H E -YE A R S D I G I T
BALANCE METHOD METHOD METHOD

Matheson’s Constant
SAMPLE
PROBLEM #
10
A machine cost ₱1.8
million. It has a salvage
value of ₱300,000 at the
end of five years. If
money is worth 6% and
using SLM,
• Determine the
depreciation charge.
• Find the book value
after 3 years.
SAMPLE
PROBLEM #
11
A machine cost ₱1.8
million. It has a salvage
value of ₱300,000 at the
end of five years. If money
is worth 6% and using
Sinking Fund Method,
• Determine the
depreciation charge.
• Find the book value
after 3 years.
SAMPLE
PROBLEM #
12
A machine cost ₱1.8
million. It has a salvage
value of ₱300,000 at the
end of five years. If money
is worth 6% and using
Declining Balance Method,
• Determine the
depreciation charge.
• Find the book value
after 3 years.
SAMPLE
PROBLEM #
13
A machine cost ₱1.8
million. It has a salvage
value of ₱300,000 at the
end of five years. If money
is worth 6% and using
Double Declining Method,
• Determine the
depreciation charge.
• Find the book value
after 3 years.
SAMPLE
PROBLEM #
14
A machine cost ₱1.8
million. It has a salvage
value of ₱300,000 at the
end of five years. If
money is worth 6% and
using SOYD Method,
• Determine the
depreciation charge.
• Find the book value
after 3 years.
Costs
REVENUE

BREAKEVE
N
O FIT ANALYSIS
PR
BREAKEVEN Variable Cost
Break-even analysis is the effort
of comparing income from sales
to the fixed costs of doing
business.

SS
LO Fixed Cost Break-even analysis is a method
of determining costs exactly
equal revenue.

Number of Sales
 BREAKEVE
N
ANALYSIS
Where R = total revenue
Costs
C = total cost REVENUE

p = selling price
FIT
f = fixed cost O
BREAKEVE PR
N Variable
a = incremental or variable cost
Cost
N = number of products to be sold
SS
LO Fixed Cost

Number of
Sales
SAMPLE
PROBLEM # 9
The cost of producing a
commodity consists of P35.00 per
unit of labor, P 42.00 per unit of
materials, and P10.00 per unit for
other variable costs. Cost of
utilities and rents amounts to P
850,000 per month. If the
commodity is sold at P310.00
each;
• What is the profit/loss if 3369
units were sold?
• How many pieces must be
produced per month for the
manufacturer to break-even?
 
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