ENGINEERING ECONOMY

1. The method of depreciation where fixed sum of money is regularly deposited at compound interest in a real or
imaginary fund in order to accumulate an amount equal to the total depreciation of an asset at the end of the assets
estimated life is known as;
A. straight line method
B. S! method
". !eclining #alance method
!. Sinking fund method
Answer: D
$. The term used to express the series of uniform payments occurring at equal inter%al of time is;
A. compound interest
B. annuity
". perpetuity
!. depreciation
Answer: B
&. The profit deri%ed from a pro'ect or #usiness enterprise without consideration og o#ligations to financial contri#utors
and claims of others #ased on profit is known as;
A. yield
B. earning %alue
". economic return
!. expected yield
Answer: C
(. As applied to capitali)ed asset* the distri#ution of the initial cost #y periodic changes to operation as in depreciation or
the reduction of the depth #y either periodic or irregular prearranged program is called
A. amorti)ation
B. annuity
". depreciation
!. capital reco%ery
Answer: A
+. Those funds that are required to make the enterprise or pro'ect going conc
A. #anking
B. accumulated amount
". working capital
!. principal or present worth
Answer: C
,. These are product or ser%ices that are desired #y humans and will #e purchased if money is a%aila#le after the
required necessities ha%e #een o#tained
A. utilities
B. necessities
". luxuries
!. producer good and ser%ices
Answer: C
-. These are product or ser%ices that are required to support human life and acti%ities* that will #e purchased in some
what the same quantity e%en thought the price %aries considera#ly.
A. utilities
B. necessities
". luxuries
!. producers goods and ser%ices
Answer : B
.. A condition where only a few indi%iduals produce a certain product and that any action of one will lead to almost the
same action of the others.
A. oligopoly
B. semi/monopoly
". monopoly
!. perfect competition
Answer : A
0. This occurs in a situation where a commodity or ser%ice is supplied #y a num#er of %endors and there is nothing to
pre%ent additional %endors entering the market.
A. perfect competition
B. monopoly
". oligopoly
!. elastic demand
Answer : A
11. 2t is the amount that a willing #uyer will pay to a willing seller for a property where each has equal ad%antage and is
under no compulsion to #uy or sell.
A. fair %alue
B. use %alue
". market %alue
!. #ook %alue
Answer : C
11. 2t is defined to #e the capacity of a commodity to satisfy human want.
A. discount
B. luxuries
". utility
!. necessity
Answer: C
1$. A form a summary of assets* lia#ilities and net worth;
A. #alance method
B. #reak/e%en point
". #alance sheet
!. production
Answer : C
1&. The worth of a property* which is equal to the original cost less depreciation* is known as;
A. earning %alue
B. scrap %alue
". #ook %alue
!. face %alue
Answer : C
1(. 3hen using net present worth calculation to compare two pro'ects* which of the following could in%alidated the
calculations4
A. mutually exclusi%e pro'ects
B. e%aluation o%er different periods
". non/con%entional cash flows
!. difference in the magnitude of the pro'ects5
Answer : B
1+. 3hich of the following is a form of #usiness6company ownership4
A. partnership
B. corporation
". single proprietorship
!. all of these Answer : D
1,. 3hat must two in%estments with the same present worth and unequal li%es ha%e4
A. identical sal%age %alue
B. different sal%age %alue
". identical equi%alent uniform annual cash flows
!. different equi%alent annual cash flows
Answer : C
1-. 3hat is the formula for a straight/line depreciation rate4
A. 1117 /7net sal%age %alue
8stimated ser%ice life
B. 7net sal%age %alue
8stimated ser%ice life
". 1117 net sal%age %alue
estimated ser%ice life
!. a%erage net sal%age %alue
estimated ser%ice life
Answer : A
1.. The amount recei%ed from the sale of an additional unit of a product is termed as9
A. marginal cost
B. marginal utility
". marginal unit
!. marginal re%enue
Answer: D
10. An accounting #ook where the original record of all transaction is ordinarily recorded.
A. 'ournal
B. credit entry
". de#it entry
!. transaction record
Answer : A
$1. An interest/earning fund in which equal deposits are made at equal inter%als of time for the purpose of gradually
accumulating a specific sum of money required at some future date.
A. amorti)ation
B. sinking fund
". annuity
!. capitali)ed cost
Answer 9 B
$1. 3hat is work/in/process classified as4
A. an asset
B. lia#ility
". an expense
!. owners equity
Answer : A
$$. 3hich is a form of #usiness6company ownership4
A. partnership
B. corporation
". single proprietorship
!. all of the list
Answer : D
$&. The decrease in %alue of a physical property due to the passage of time;
A. inflation
B. depletion
". recession
!. depreciation
Answer : D
$(. 3e may classify an interest rate* which specifies the actual rate an interest on the principal for one year as9
A. :ominal rate
B. ;ate of return
". 8xact interest rate
!. 8ffecti%e rate
Answer : D
$+. This law states that <3hen the use of one of the factors of production is limited* either in increasing cost or #y a#solute
quantity* a point will #e reached #eyond which an increase in the %aria#le factors will result in less than proportionate
increase in output.=
A. >aw of Supply and !emand
B. >aw of !iminishing ;eturn
". >aw of ?ra%ity
!. >aw of diminishing @tility
Answer : D
$,. The difference #etween the present worth and the worth at some future time is9
A. !iscount
B. Arofit
". "redit
!. !e#it
Answer : A
$-. The act of charging two or more #uyers or sellers different prices for the same product where the elasticities of supply
or demand at each price le%el differ among market is known as9
A. Arice optimi)ation
B. Arice discrimination
". Arice manipulation
!. Arice war
Answer: B
$.. A formal organi)ation of producers within an industry forming a perfect collision purposely formed to increase profit
and #lock newcomers from the industry* is termed as;
A. Bligopoly
B. Conopoly
". "orporation
!. "artel Answer: D
$0. A situation in which ri%al firms dri%e prices down through attempts to undercut each others price is called;
A. Arice war
B. Arice discrimination price
". Arice >eadership
!. Bligopolistic monopoly Answer: A
&1. The price that the quantity per unit time that the #uyers want to #uy is 'ust equal to the quantity the sellers want to sell
is called;
A. Break/e%en price
B. 8quili#rium price
". Cinimum price
!. Caximum price
Answer: B
&1. The length of time during which a property is capa#le of performing the function for which it was designed and
manufactured is termed as;
A. economic life
B. >ife span
". 8ternal life
!. Ahysical life
Answer : D
&$. 2t is a distinct legal entity* separate from indi%iduals who own it and which can engage in pratically any #usiness
transaction which real person can do.
A. Aartnership
B. Single proprietorship
". 8ternal >ife
!. Ahysical life
Answer : A
&&. A market where#y there is only one #uyer of an item for which there are no goods su#stitute.
A. Conopoly
B. Bligopoly
". Bligopsony
!. Conopsony
Answer : D
&(. This form of #usiness ownership is a legal entity possessing many of the legal powers of indi%iduals. 2t can hold title
to property* sue and #e sued in its own name. 2t is called9
A. corporation
B. company
". general partnersahip
!. indi%idual proprietorship
Answer : A
&+. The #alance sheet is a statement showing the financial status of the company at any gi%en time. 3hich of the
statements is not a part of the #alance sheet.
A. lia#ilities
B. assets
". cost of goods sold
!. net worth
Answer : C
&,. ;efers to cost of merchandise which excludes freight and insurance cost;
A. freight/on/#oard
B. sunk cost
". de#entures
!. #ook %alue Answer: D
&-. A fund into which annual deposits of A are made in order to accumulate fund D at n years in the future.
A. Amorti)ation
B. Annuity
". !epreciation
!. Singking fund Answer : D
&.. "ash money credit necessary to esta#lish and operate an enterprise.
A. funds
B. capital
". lia#ilities
!. assets
Answer: B
&0. the worth of property which is equal to the original cost less depreciation;
A. scrap %alue
B. earning %alue
". #ook %alue
!. face %alue
Answer: C
(1. 2ntangi#le assets of a corporation or company
A. dacion/en/pago
B. in%estment
". patents
!. equity
Answer : C
(1. additional information to prospecti%e #idders on contract documents issued to #idding date;
A. escalatory clause
B. delicts
". technological assessments
!. #id #ulletin
Answer: D
($. A ci%il wrong committed #y one person causing damage to another person or his property or reputation;
A. tort
B. negligence
". material #reach
!. fraud
Answer: A
(&. 3hat is an annuity4
A. A series of equal payments at equal time periods.
B. The cost of manufacturing a product
". An in%estment that yields an equal amount of interest each year
!. The o%erhead cost per unit of production
Answer: A
((. "onsist of the actual counting or determination of the actual quantity of the materials on hands as of a gi%en date;
A. Ahysical in%entory
B. Technological assestment
". Caterial update
!. Caterial count
Answer: A
(+. An artificial expense that spreads the purchase price of an assets or other property o%er a num#er of years
A. !epreciation amnesty
B. Sinking fund
". Bond Answer: A
(,. estimated %alue at the end of the useful life;
A. sal%age %alue
B. economic life
". #alance sheet
!. compounded annually Answer: A
(-. The recorded current %alue of an asset is known as 9
A. scrap %alue
B. #ook %alu
". sal%age %alue
!. present worth Answer: B
(.. The ratio of the interest payment to the principal for a gi%en unit of time and is usually expressed as percentage of
the principal is known as9
A. in%estment
B. nominal interest
". interest
!. interest rate
Answer: D
(0. A method of depreciation where#y the amount to reco%er is spread o%er the estimated life of the asset in terms of the
periods or units of output is called
A. SB! method
B. !eclining #alance method
". Straight line method
!. Singking fund method
Answer: C
+1. The interest rate at which the present worth of cash flow of a pro'ect is )ero* or the interest earned #y an in%estment.
A. ;ate of return
B. 8ffecti%e rate
". :ominal rate
!. ield
Answer: A
+1. 2t is the amount of money earned #y gi%en capital9
A. 2nterest
B. Annuity
". "ash flow
!. :one of the a#o%e
Answer: A
+$. 3hich of the following is a type of simple interest;
A. Brdinary
B. 8xact
". Both A and B
!. :one of the a#o%e
Answer: C
+&. The interest earned #y the principal competed at the end of the in%estment period* it %aries directly with time.
A. "ompound interest
B. Simple interest
". Annuity
!. Aerpetuity
Answer: B
+(. The interes is completed e%ery end of each interest period and the interest earned for the period is added to the
principal.
A. "ompound interest
B. Simple interest
". Annuity
!. Aerpetuity
Answer: A
++. 2t is rate quoted in descri#ing a gi%en %ariety of compound interest
A. nominal rate
B. effecti%e rate
". simple rate
!. compound rate
Answer: A
+,. 2t is the actual interest earned in one year period.
A. :ominal rate
B. 8ffecti%e rate
". Simple rate
!. "ompound rate
Answer: B
+-. a series of uniform payments made at equal inter%als of time .
A. perpetuity
B. interest
". rate
!. annuity
Answer: D
+.. 3hich of the following is type of annuity.
A. Brdinary
B. !eferred
". Annuity due
!. All of the a#o%e
Answer: D
+0. An annuity where thepayments periods extend fore%er or the periodic payments continue indefinitely.
A. Aerpetuity
B. 2nterest
". ;ate
!. Annuity
Answer: A
,1. The payment is made at the end of each perio starting from the first period.
A. Brdinary annuity
B. !eferred annuity
". Annuity due
!. All of the a#o%e
Answer: A

,1. The first payment is deferred a certain num#er of periods after the first.
A. Brdinary annuity
B. !effered annuity
". Annuity due
!. :one of the a#o%e
Answer: B
,$. The payment is made at the #eginning of each period starting from the first period.
A. Brdinary annuity
B. !effered annuity
". Annuity due
!. :one of the due
Answer: D

,&. 2t is an application of perpetuity.
A. "apitali)ed cost
B. Cachine cost
". Canpower cost
!. 8quipment cost
Answer: A
,(. 2t refers to the decrease in the %alue of an asset due to usage of passage of time.
A. 2nterest
B. Annuity
". !epreciation
!. Aerpetuity
Answer: C
,+. 3hich of the following is the method of computing depreciation
A. Straight line depreciation
B. Sinking fund method
". Sum of the years method
!. All of the a#o%e.
\ Answer: D
,,. The most common method used in computing depreciation;
A. Straight line depreciation
B. Sinking fund method
". Sum of the years digit method
!. !eclining #alance method
Answer: A
,-. The depreciation charge in this method is assumed to %ary directly to the num#er of years and in%ersely to the sum of
the years digit.
A. Straight line depreciation
B. Sinking fund method
". Sum of the years digit method
!. !eclining #alance method
Answer: C
,.. 2t is in%ested yearly at a rate of 2 to amount to ED" FSGH at the end of the life to the property.
A. Straight line depreciation
B. Sinking fund method
". Sum of the years digit method
!. !eclining #alance method
Answer: B
,0. A written contract to pay a certain redemption %alue on a specified redemption date and to pay equal di%idends
periodically
A. Bond
B. "apital
". 2nterest
!. Annuity
Answer; A

-1. A method of determining when cost exactly equal to re%enue.
A. 8xoerimental method
B. Break/e%en method
". Break/add method
!. :one of the a#o%e
Answer: B
-1. Dind the interest on A,*.11.11 for & years at 117 simple interest.
A. A 1*.-+.11
B. A 1*0.-.11
". A $*1((.11
!. A $*$((.11
Answer: D
-$. A man #orrowed A11*111.11 from his friend and agrees to pay at the end of 01 days
under .7 swimple interest rate. 3hat is the required amount4
A* A 11*$11.11
B A 11*+11.11
". A 0*+11.11
!. A 11*-11.11
Answer: A
-&. Annie #uys a tele%ision set from a merchant who offers A$+*111.11 at the end of ,1 days.
Annie wished to pay immediately and the merchant offers to compute the required amount on
the assumption that the money is worth 1(7 simple interest. 3hat is the required amount4
A. A $1*$&(..-
B. A 10*$$$.,-
". A $(*($0.0-
!. A $.*(+,.$&
Answer: C
-(. 3hat is the principal amount if trhe amount of interes at the end of $16$ year is A(*+11.11
for a simple interest of ,7 per annum4
A. A &+*111.11
B. A &1*111.11
". A (1*111.11
!. A (+*111.11
Answer: B
-+. Iow long must a A(1*111 note #earing (7 simple interest run to amount to A(1*&+1.114
A. &(1 days
B. (1& days
". &1( days
!. (&1 days
Answer:C
-,. 2f A1,*111 earns A(.1 in 0 monnths* what is the annual rate of interest4
A. 17
B. $7
". &7
!. (7
Answer: D
--. A man lends A,*111 at ,7 simple interest for ( years. At the end of this time he in%est the
entire amount Eprincipal plus interestH at +7 compounded annually for 1$ years. Iow much
will he ha%e at the end of the 1,/year period.4
A. A 1&*&,1.$1
B.. A 1&*,&&.$1
". A 1&*&&&.$1
!. A 1,*&$&.$1
Answer: A
-.* A time deposit of A111*111 for &1 days earns A.01.&0 on maturity date after deducting the
$17 withholding tax on interest income. Dind interest per annum.
A. 1$.+7
B. 11.0+7
". 1$.$+7
!. 11.-+7
Answer: D
-0. A #ank charges 1$7 simple interest on a A&11.11 loan. Iow much will #e repaid if the loan
is paid #ack in one lump sum after three years.
A. A (1..11
B. A ++1.11
". A (1+.11
!. A (+1.11
Answer: A
.1. A tag price of a certain commodity is for 111 days. 2f paid in &1 days* there is &7 discount.
3hat is the simple interest paid.4
A. 1$.+7
B. ,.$+7
". $$.&$7
!. 1,.1(7
Answer: D
.1. Accumulate A+*111.11 for 11 years at .7 compounded quarterly.
A. A 1$*(+,.$1
B. A 1&*.-,.+1
". A 11*&(+..1
!. A 11*1(1.$1
Answer: D
.$. Accumulate A+*111.11 for 11 years at .7 compounded semi/annually.
A. A 11*0++.,1
B. A 11*$&&.,-
". A 0*(++.,-
!. A 11*.-,.&(
Answer: A
.&. Accumulate A+*111.11 for 11 years at .7 compounded monthly
A. A 1+*(+,.-+
B. A 11*11$.,1
". A 11*0++.,1
!. A 11*0++.,1
Answer: B
.(. Accumulate A+*111.11 for 11 years at .7 compounded annually.
A. A 11*-0(.,$
B. A .*+,-.0-
". A 11*0.-.01
!. A -*.-,..-
Answer: A
.+. Iow long it will take A1*111 to amount to A1*&(, if in%ested at ,7 compounded quarterly.
A. & years
B. ( years
". + years
!. , years
Answer: C
.,. Iow long will it take for an in%estment to dou#le its amount if in%ested at an interest rate of ,7
compounded #i/monthly
A. 11 years
B. 1$ years
". 1& years
!. 1( years
Answer: B
.-. 2f the compound interest on A&*111.11 in years is A+11.11 then the compound interest on
A&*111.11 in ( years is9
A. A 0+,.11
B. A 1*1.&.11
". A 1*1$+.11
!. A 1*+$,.11
Answer: B
... The salary of Cr. "ru) is increased #y &17 e%ery $ years #eginning January 1* 10.$.
"ounting from that date* at what year will his salary 'ust exceed twice his original salary4
A. 10..
B. 10.0
". 1001
!. 1001
Answer: A
.0. 2f you #orrowed A11*111 from the #ank with 1.7 interest per annum* what is the total amount
to #e repaid at the end of one year.
A. A 11*.11.11
B. A 10*111.11
". A $.*111.11
!. A 11*1.1.11
Answer: A
01. 3hat is the effecti%e rate for an inteerest rate at 1$7 compounded continously4
A. 1$.117
B. 1$..07
". 1$.($7
!. 1$.-+7
Answer: D
01. Iow long it will take for an in%estment to fi%efold its amountif money is worth 1(7 compounded
semiannually.
A. 11
B. 1$
". 1&
!. 1(
Answer: B
0$. An interest of .7 compounded semiannually is how many percent if compounded quarterly4
A. -..17
B. -..+7
". -.0$7
!. ..117
Answer: C
0&. A man is expecting to recei%e A(+1*111.11 at the end of - years. 2f money is worth1(7
compounded quarterly how much is it worth at present4
A. A 1$+*(+..&,
B. A 1(-*(+,.&,
". A 1,$*(++.,&
!. A 1-1*-((.((
Answer: D
0(. A man has a will of A,+1*111.11 from his father. 2f his father deposited an amount of A(+1*111
in a trust fund earning .7 compounded annually* after how many years will the man recei%e his
will4
A. (.++ years
B. (.-- years
". +.11 years
!. +.&& years
Answer: B
0+. Cr. Adam deposited A1$1*111.11 in a #ank who offers .7 interest compounded quarterly. 2f
the interest is su#'ect to a 1(7 tax* how much will he recei%e after + years4
A. A 1-.*&1&.,0
B. A 1+&*&(0.--
". A 1-1*1(0.--
!. A 1-+*&(&.--
Answer: C
0,. 3hat interest compounded monthly is equi%alent to an interest rate of 1(7 compounded quarterly
A. 1.1+7
B. 1&..(7
". 11.1&7
!. 11.+$7
Answer: B
0-. 3hat is the worth of two A111*111 payments at the end of the third and the fourth year4 The
annual interest rate is .7.
A. A 1+$..-
B. A 11$.&(
". A 1.-.0.
!. A 1-,.,-
Answer: A
0.. A firm #orrows A$*111.11 for , years at .7. At the end of , years* it renews the loan for the
amiount due plus A$*111 more for $ years at .7. 3hat is the lump sum due.
A. A +*,-0.,-
B. A ,*-.0.0.
". A ,*1&(.,,
!. A +*....--
Answer: C
00. At an annual rate of return of .7* what is the future worth of A1*111 at the end of ( years4
A. A 1*&...01
B. A 1*$&(.+,
". A 1*-,+.+,
!. A 1*&,1.+1
Answer: D
111. A student has money gi%en #y his grandfather in the amount of A$1*111.11. Iow much
money in the formof interest will he get if the money isput in a#ank that offers .7 rate
compounded annually at the end of - years4
A. A &(*$-,.(.
B. A &(*$-1.11
". A &,*$-,.(1
!. A &(*$,,.,.
Answer: A