Question 1

Given the cash flow diagram below, evaluate the value of "A" for an interest rate of 7%.

Accepted Answer

A)  $585 
B)  $1045.72 
C)  $1200 
D)  $915 
A)  $585 
B)  $1045.72 
C)  $1200 
D)  $915 B

Question 2

Given the cash flow diagram below, evaluate the "X" value using an interest rate of 8%.
$$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline \text { Year } & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 \
\hline \text { Cash flow } & - X & 400 & 500 & - X & 700 & 800 & 900 & 1,000 & 1,100 & 1,200 & 1,300 \
\hline
\end{array}$$

Accepted Answer

A)  $7,201 
B)  $6,781 
C)  $3410.23 
D)  $6,525 
A)  $7,201 
B)  $6,781 
C)  $3410.23 
D)  $6,525 C

Question 3

In developing cash flow diagrams the convention is to use a negative cash flow for receipts.

Accepted Answer

A) True 
 B)False  False

Question 4

In order to use the gradient series factors to solve a set of given cash flows, the cash flows must increase or decrease gradually by the same amount every year, starting year 2 and must have zero cash flow in year 1.

Accepted Answer

A) True 
 B)False

Question 5

IAN Tech is saving $10,000 a month in a money fund to pay for equipment that will cost $700,000 five years from now. If the interest rate is 1/4% per month, how much additional funds will be needed to pay for this equipment?

Accepted Answer

A)  $48,239 
B)  $53,530 
C)  $59,750 
D)  $25,070 
A)  $48,239 
B)  $53,530 
C)  $59,750 
D)  $25,070

Question 6

Mary is planning to repay a debt of 50,000 with a quarterly payment $2,400 for the next 23 quarters and a final payment of "X" dollars at the end of 24-th quarter. If the interest rate is 12% per year, compounded quarterly, how much will be Mary's final payment?

Accepted Answer

A)  $21,426 
B)  $22,176 
C)  $23,010 
D)  $23,920 
A)  $21,426 
B)  $22,176 
C)  $23,010 
D)  $23,920

Question 7

Determine the unknown from the cash flow diagram shown below. i = 10%.

Accepted Answer

A)  $12,160 
B)  $14,500 
C)  $10,108 
D)  $12,809 
A)  $12,160 
B)  $14,500 
C)  $10,108 
D)  $12,809

Question 8

If the uniform series capital recovery factor is 0.1359 and the sinking fund factor is 0.0759, then the interest rate is 6%.

Accepted Answer

A) True 
 B)False

Question 9

What is the present worth of the cash flows in table below? Use an interest rate of 6% compounded annually.
  $$\begin{array} { | l | l | l | l | l | l | l | } 
\hline \text { Year } & 1 & 2 & 3 & 4 & 5 & 6 - 20 \
\hline \text { Cash flow } & 6,000 & 5,000 & 4,000 & 3,000 & 2,000 & 10,000 \
\hline
\end{array}$$

Accepted Answer

A)  $89,263 
B)  $85,496 
C)  $89,915.77 
D)  $91,611 
A)  $89,263 
B)  $85,496 
C)  $89,915.77 
D)  $91,611

Question 10

For the cash flow diagram below, determine the value of P

Accepted Answer

A)  $119.26 
B)  $195.49 
C)  $71 
D)  $147.20 
A)  $119.26 
B)  $195.49 
C)  $71 
D)  $147.20

Question 11

A set of cash flows are given in table below, using the principles of equivalence, determine the value "Y" for an interest rate of 8% compounded annually.
$$\begin{array} { | l | l | l | l | l | l | l | l | } 
\hline \text { Year } & 0 & 1 & 2 & 3 & 4 & 5 & 5 - 10 \
\hline \text { Cash flow in \$ } & - 5,000 & 0 & 0 & 0 & - 1,000 & - 1,000 & Y \
\hline
\end{array}$$

Accepted Answer

A)  $1,402.34 
B)  $1,887.50 
C)  $1,107.78 
D)  $2,328.25 
A)  $1,402.34 
B)  $1,887.50 
C)  $1,107.78 
D)  $2,328.25

Question 12

Ben invested $20,000 into a money market account and took out $5,000 at the end of year 5. He found out at the end of 10 years that he had as of $50,000 in the account.
What is the annual interest rate Ben had earned on this investment?

Accepted Answer

A)  8% 
B)  12.93% 
C)  15.23% 
D)  11.38% 
A)  8% 
B)  12.93% 
C)  15.23% 
D)  11.38%

Question 13

Determine the value of P from the cash flows shown in table below. Interest rate = 10%.
$$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline \text { Year } & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 \
\hline \text { Cash flow } & - X & 400 & 500 & - X & 700 & 800 & 900 & 1,000 & 1,100 & 1,200 & 1,300 \
\hline
\end{array}$$

Accepted Answer

A)  $8,102 
B)  $5,197.5 
C)  $9,211.2 
D)  $7,284.9 
A)  $8,102 
B)  $5,197.5 
C)  $9,211.2 
D)  $7,284.9

Question 14

Choose the equation below that can be used to determine the value of "P" for a known interest rate, i.
$$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline \text { Year } & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 \
\hline \text { Cash flow } & - X & 400 & 500 & - X & 700 & 800 & 900 & 1,000 & 1,100 & 1,200 & 1,300 \
\hline
\end{array}$$

Accepted Answer

A)  P = 10,000(P/F, i%, 5) - 2,000(P/G, i%, 5) 
B)  P = 10,000- 1,000(P/G, i%, 5) (F/P, i%, 5) 
C)  P= 10,000(P/F, i%, 5) -2,000(P/G, i%, 5) 
D)  P= -10,000(P/F, i%, 5) + 2,000(P/G, i%, 4) 
A)  P = 10,000(P/F, i%, 5) - 2,000(P/G, i%, 5) 
B)  P = 10,000- 1,000(P/G, i%, 5) (F/P, i%, 5) 
C)  P= 10,000(P/F, i%, 5) -2,000(P/G, i%, 5) 
D)  P= -10,000(P/F, i%, 5) + 2,000(P/G, i%, 4)

Question 15

Tom started investing, as soon as he started his first job, at the rate of $400 per month as soon as get paid into a savings account that earns an interest of 1% per month. Which of the following expression may be used to determine the account value 10 years from now?

Accepted Answer

A)  F = [4,800(P/A, 12%, 10)] [(F/P, 12%, 10)] 
B)  F = 400[(P/A, 1%, 120) (F/P, 12%, 5)] 
C)  F= [400/0.01] (F/P, 1%, 60) 
D)  F= 400(F/A, 1%, 120) 
A)  F = [4,800(P/A, 12%, 10)] [(F/P, 12%, 10)] 
B)  F = 400[(P/A, 1%, 120) (F/P, 12%, 5)] 
C)  F= [400/0.01] (F/P, 1%, 60) 
D)  F= 400(F/A, 1%, 120)

Question 16

For an interest rate of 10% compounded annually, evaluate the value of "X" from the cash flows given in table below.
$$\begin{array} { | l | l | l | l | l | l | l | } 
\hline \text { Year } & 0 & 1 & 2 & 3 & 4 & 5 \
\hline \text { Cash flows } & - 10,000 + X & 1,600 & 1,700 & 1,800 & 1,900 & 3,500 \
\hline
\end{array}$$

Accepted Answer

A)  $2,316.85 
B)  $3,295.43 
C)  $1,064.74 
D)  $1,102.75 
A)  $2,316.85 
B)  $3,295.43 
C)  $1,064.74 
D)  $1,102.75

Question 17

The weekly payment for a $500 loan to be paid back in 104 payments at an interest rate of 0.25% per week is $6.82.

Accepted Answer

A) True 
 B)False

Question 18

Given the cash flow table below, determine the unknown value "X" for an interest rate of 6%.
$$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline \text { Year } & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 \
\hline \text { Cash flow } & - X & 400 & 500 & - X & 700 & 800 & 900 & 1,000 & 1,100 & 1,200 & 1,300 \
\hline
\end{array}$$

Accepted Answer

A)  $2436.89 
B)  $3129.41 
C)  $2935.66 
D)  $1610.53 
A)  $2436.89 
B)  $3129.41 
C)  $2935.66 
D)  $1610.53

Question 19

Interest compounding daily than continuous compounding for a known interest rate will provide a larger yield.

Accepted Answer

A) True 
 B)False

Question 20

Case Study 4
Daniel borrowed $20,000 with a promise to repay the loan in 6 years with a uniform monthly payment and a single payment of $2,000 at the end of six years at a nominal interest rate of 12% per year.
-A. What is the amount of each payment?
B. What is the amount of interest paid in the first payment?
C. What will be the loan balance immediately after the 48th payment?

Accepted Answer

The answer of Case Study 4
Daniel borrowed $20,000 with a...

Given the cash flow diagram below, evaluate the value of "A" for an interest rate of 7%.

Given the cash flow diagram below, evaluate the "X" value using an interest rate of 8%. Year 0 1 2 3 4 5 6 7 8 9 10 Cash flow -X 400 500 -X 700 800 900 1,000 1,100 1,200 1,300

In developing cash flow diagrams the convention is to use a negative cash flow for receipts.

In order to use the gradient series factors to solve a set of given cash flows, the cash flows must increase or decrease gradually by the same amount every year, starting year 2 and must have zero cash flow in year 1.

IAN Tech is saving $10,000 a month in a money fund to pay for equipment that will cost $700,000 five years from now. If the interest rate is 1/4% per month, how much additional funds will be needed to pay for this equipment?

Mary is planning to repay a debt of 50,000 with a quarterly payment $2,400 for the next 23 quarters and a final payment of "X" dollars at the end of 24-th quarter. If the interest rate is 12% per year, compounded quarterly, how much will be Mary's final payment?

Determine the unknown from the cash flow diagram shown below. i = 10%.

If the uniform series capital recovery factor is 0.1359 and the sinking fund factor is 0.0759, then the interest rate is 6%.

What is the present worth of the cash flows in table below? Use an interest rate of 6% compounded annually. Year 1 2 3 4 5 6-20 Cash flow 6,000 5,000 4,000 3,000 2,000 10,000

For the cash flow diagram below, determine the value of P

A set of cash flows are given in table below, using the principles of equivalence, determine the value "Y" for an interest rate of 8% compounded annually. Year 0 1 2 3 4 5 5-10 Cash flow in \ -5,000 0 0 0 -1,000 -1,000 Y

Ben invested $20,000 into a money market account and took out $5,000 at the end of year 5. He found out at the end of 10 years that he had as of $50,000 in the account. What is the annual interest rate Ben had earned on this investment?

Determine the value of P from the cash flows shown in table below. Interest rate = 10%. Year 0 1 2 3 4 5 6 7 8 9 10 Cash flow -X 400 500 -X 700 800 900 1,000 1,100 1,200 1,300

Choose the equation below that can be used to determine the value of "P" for a known interest rate, i. Year 0 1 2 3 4 5 6 7 8 9 10 Cash flow -X 400 500 -X 700 800 900 1,000 1,100 1,200 1,300

Tom started investing, as soon as he started his first job, at the rate of $400 per month as soon as get paid into a savings account that earns an interest of 1% per month. Which of the following expression may be used to determine the account value 10 years from now?

For an interest rate of 10% compounded annually, evaluate the value of "X" from the cash flows given in table below. Year 0 1 2 3 4 5 Cash flows -10,000+X 1,600 1,700 1,800 1,900 3,500

The weekly payment for a $500 loan to be paid back in 104 payments at an interest rate of 0.25% per week is $6.82.

Given the cash flow table below, determine the unknown value "X" for an interest rate of 6%. Year 0 1 2 3 4 5 6 7 8 9 10 Cash flow -X 400 500 -X 700 800 900 1,000 1,100 1,200 1,300

Interest compounding daily than continuous compounding for a known interest rate will provide a larger yield.

Making Economic Decisions

Estimating Engineering Costs and Benefits

Interest and Equivalence

Present Worth Analysis

Annual Cash Flow Analysis

Rate of Return Analysis

Choosing the Best Alternative

Other Analysis Techniques

Uncertainty in Future Events

Depreciation

Income Taxes for Corporations

Replacement Analysis

Inflation and Price Change

Selection of a Minimum Attractive Rate of Return

Economic Analysis in the Public Sector

Accounting and Engineering Economy

Filters

Exam 4: Equivalence for Repeated Cash Flows

Given the cash flow diagram below, evaluate the value of "A" for an interest rate of 7%.

Given the cash flow diagram below, evaluate the "X" value using an interest rate of 8%. Year 0 1 2 3 4 5 6 7 8 9 10 Cash flow -X 400 500 -X 700 800 900 1,000 1,100 1,200 1,300

In developing cash flow diagrams the convention is to use a negative cash flow for receipts.

In order to use the gradient series factors to solve a set of given cash flows, the cash flows must increase or decrease gradually by the same amount every year, starting year 2 and must have zero cash flow in year 1.

IAN Tech is saving $10,000 a month in a money fund to pay for equipment that will cost $700,000 five years from now. If the interest rate is 1/4% per month, how much additional funds will be needed to pay for this equipment?

Mary is planning to repay a debt of 50,000 with a quarterly payment $2,400 for the next 23 quarters and a final payment of "X" dollars at the end of 24-th quarter. If the interest rate is 12% per year, compounded quarterly, how much will be Mary's final payment?

Determine the unknown from the cash flow diagram shown below. i = 10%.

If the uniform series capital recovery factor is 0.1359 and the sinking fund factor is 0.0759, then the interest rate is 6%.

What is the present worth of the cash flows in table below? Use an interest rate of 6% compounded annually. Year 1 2 3 4 5 6-20 Cash flow 6,000 5,000 4,000 3,000 2,000 10,000

For the cash flow diagram below, determine the value of P

A set of cash flows are given in table below, using the principles of equivalence, determine the value "Y" for an interest rate of 8% compounded annually. Year 0 1 2 3 4 5 5-10 Cash flow in \ -5,000 0 0 0 -1,000 -1,000 Y

Ben invested $20,000 into a money market account and took out $5,000 at the end of year 5. He found out at the end of 10 years that he had as of $50,000 in the account. What is the annual interest rate Ben had earned on this investment?

Determine the value of P from the cash flows shown in table below. Interest rate = 10%. Year 0 1 2 3 4 5 6 7 8 9 10 Cash flow -X 400 500 -X 700 800 900 1,000 1,100 1,200 1,300

Choose the equation below that can be used to determine the value of "P" for a known interest rate, i. Year 0 1 2 3 4 5 6 7 8 9 10 Cash flow -X 400 500 -X 700 800 900 1,000 1,100 1,200 1,300

Tom started investing, as soon as he started his first job, at the rate of $400 per month as soon as get paid into a savings account that earns an interest of 1% per month. Which of the following expression may be used to determine the account value 10 years from now?

For an interest rate of 10% compounded annually, evaluate the value of "X" from the cash flows given in table below. Year 0 1 2 3 4 5 Cash flows -10,000+X 1,600 1,700 1,800 1,900 3,500

The weekly payment for a $500 loan to be paid back in 104 payments at an interest rate of 0.25% per week is $6.82.

Given the cash flow table below, determine the unknown value "X" for an interest rate of 6%. Year 0 1 2 3 4 5 6 7 8 9 10 Cash flow -X 400 500 -X 700 800 900 1,000 1,100 1,200 1,300

Interest compounding daily than continuous compounding for a known interest rate will provide a larger yield.

Making Economic Decisions

Estimating Engineering Costs and Benefits

Interest and Equivalence

Present Worth Analysis

Annual Cash Flow Analysis

Rate of Return Analysis

Choosing the Best Alternative

Other Analysis Techniques

Uncertainty in Future Events

Depreciation

Income Taxes for Corporations

Replacement Analysis

Inflation and Price Change

Selection of a Minimum Attractive Rate of Return

Economic Analysis in the Public Sector

Accounting and Engineering Economy

Filters