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11-CS-1 Engineering Economics · December 2019

Question 1 of 5: Simple, Compound, Effective, and Continuous Interest

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National Exams — December 2019 — 11-CS-1 Engineering Economics. Open book; non-communicating calculator permitted. Any four of the five questions constitute a complete paper; all questions are of equal value. Fully worked solutions to all five follow.

Question 1: Simple, Compound, Effective, and Continuous Interest (25 marks)

Question text not reproduced: the examination questions are © Engineers and Geoscientists BC. Open the official past paper (linked at the top of this page) to read the question, then follow the worked solution below.

(a) Simple Interest

$$I = 700(0.12)(3) = \boxed{\$252}$$

(b) Compound Amount — 10% Annual, 10 Years

$$F = 500(1.10)^{10} = 500(2.593742) = \boxed{\$1{,}296.87}$$

(c) Effective Rate — 24% Compounded Daily

$$i_a = \left(1+\tfrac{0.24}{365}\right)^{365}-1 = \boxed{27.11\%}$$

(d) Doubling Time — 11% Continuous

$$e^{0.11t} = 2 \;\Rightarrow\; t = \frac{\ln 2}{0.11} = \boxed{6.30\ \text{years}}$$
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