DEPARTMENT OF INDUSTRIAL ENGINEERING

COLLEGE OF ENGINEERING AND AGRO-INDUSTRIAL TECHNOLOGY

UNIVERSITY OF THE PHILIPPINES LOS BAOS

IE 150 Systems Evaluation

Problem Set for Exam 2

Write your answers in A4 paper and show all solutions.
Submission is on Monday on or before 12PM.
1. If you borrow money from your friend with simple interest of 12% per year,
find the present worth of P20,000, which is due at the end of nine months.
2. A sum of P1,000.00 is invested now and left for eight years, at which time the
principal is withdrawn. The interest earned is left for another eight years. If
the effective annual interest is 5%, what will be the withdrawal amount at the
end of the 16th year?
3. A faculty who won P300,000 in a Grand Alumni Homecoming Raffle decided
to place 50% of his winning in a trust fund for the college education of his
son. If the money will earn 14% per year compounded quarterly, how much
will the man have at the end of 10 years when his son will be starting his
college education?
4. What is the nominal rate of interest compounded continuously for 10 years if
the compound amount factor is equal to 1.34986?
5.

Maintenance cost of an equipment is P20,000 for 2 years, P40,000 at the end

of 4 years, and P80,000 at the end of 8 years. Compute for the semi-annual
amount that be set aside for this equipment. Money worth 10% compounded
annually.

6. A man wishes to have $35,000 when he retires 15 years from now. If he can
expect to receive 4% annual interest, how much he should set aside in each
of 15 equal annual beginning of year deposits?
7. Find the present worth of all the cash disbursements if money is worth 15%
per annum. Annual cash disbursements increases by P1,000 every year
thereafter, until the end of the fourth year. The first cash disbursement
amounts to P5,000 at the end of first year.
8. Carol Calc plans on retiring on her 60th birthday. She wants to put the same
amount of funds aside each year for the next twenty years -- starting next
year -- so that she will be able to withdraw $50,000 per year for twenty years
once she retires, with the first withdrawal on her 61st birthday. Carol is 20
years old today. How much must she set aside each year for her retirement if
she can earn 10% on her funds?
9. Neighboring parishes in Louisiana have agreed to pool road tax resources
already designated for bridge refurbishment. At a recent meeting, the
engineers estimated that a total of $500,000 will be deposited at the end of
next year into an account for the repair of old and safety-questionable
bridges throughout the area. Further, they estimate that the deposits will

DEPARTMENT OF INDUSTRIAL ENGINEERING

COLLEGE OF ENGINEERING AND AGRO-INDUSTRIAL TECHNOLOGY
UNIVERSITY OF THE PHILIPPINES LOS BAOS

IE 150 Systems Evaluation

Problem Set for Exam 2

increase by $100,000 per year for only 9 years thereafter, then cease.
Determine the equivalent (a) present worth and (b) annual series amounts, if
public funds earn at a rate of 5% per year.
10.The Trust Worthy loan company is willing to lend you $10,000 today if you
promise to repay the loan in six monthly payments of $2,000 each, beginning
today. What is the effective annual interest rate on Trust Worthy's loan terms?
11.Suppose that one has a present loan of $1,000 and desires to determine what
equivalent uniform end-of-year payments, A, could be obtained from it for 10
years if the nominal interest rate is 20% compounded continuously.