The American University in Cairo

School of Sciences & Engineering

ENGR 3222-03 Engineering Economy

Review Set 1
Problems
1)

How much money today is equivalent to $10,000 in '12 years, with interest at 10%

compounded annually?

2) If $5000 is deposited into a fund paying 8% compounded annually, what sum will be accumulated
at the end of 10 years? What would be the sum accumulated at the end of 5 years if the fund paid
16% compounded annually? What is suggested regarding doubling the: interest rate and halving the
length of the time period? If you had $5000 available for investment and the two options were
available, which would you choose if you had to choose one of them? Justify your choice. If you
chose the shorter duration investment, what will you do with your accumulated monies over the
next 5-year period? Should the answer to this question influence your choice?

3) If a fund pays 12% compounded annually, what single deposit now will accumulate
$12,000 at the end of the tenth year? If the fund pays 6% compounded annually, what single deposit
is required now in order to accumulate $6000 at the end of the tenth year?

4) Maria deposits $1200, $500, and $2000 at t = 1, 2, and 3, respectively. If the fund pays 8%
compounded per period, what sum will be accumulated in the fund at (a) t = 3 and (b) t = 6?

5) suppose you wanted to become a millionaire at retirement. If an annual compound

interest rate of 8% could be sustained over a 40-year period, how much would have to be
deposited yearly in the fund in order to accumulate $1 million? What if the interest rate is
10%? , 12%?

6) Juan deposits $1000 in a savings account that pays 8% compounded annually. Exactly 2
years later he deposits $3000; 2 years later he deposits $4000; and 4 years later he withdraws
all of the interest earned to date and transfers it to a fund that pays 10% compounded annually.

The American University in Cairo

School of Sciences & Engineering

ENGR 3222-03 Engineering Economy

How much money will be in each fund 4 years after the transfer?

7) A debt of $1000 is incurred at t = 0. What is the amount of four equal payments at t = 1, 2, 3,

and 4 that will repay the debt if money is worth 10% compounded per period?

8) Five deposits of $500 each are made at t = 1, 2, 3, 4, and 5 into a fund paying 6% compounded
per period. How much will be accumulated in the fund at (a) t = 5, and B (b) t = 10?

9) What equal annual deposits must be made at t = 2, 3, 4, 5, and 6 in order to accumulate

$25,000 at t = 8 if money is worth 10% compounded annually?

The American University in Cairo

School of Sciences & Engineering

Solutions

ENGR 3222-03 Engineering Economy

The American University in Cairo

School of Sciences & Engineering

ENGR 3222-03 Engineering Economy

The American University in Cairo

School of Sciences & Engineering

ENGR 3222-03 Engineering Economy

The American University in Cairo

School of Sciences & Engineering

ENGR 3222-03 Engineering Economy